The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds

Jaehyuk Choi, Lei Lu, Heungju Park and Sungbin Sohn

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This paper examines the effect of the political network of Chinese municipal leaders on the pricing of municipal corporate bonds. Using municipal leaders’ working experience to measure the political network, we find that this network reduces the bond issuance yield spreads by improving the credit ratings of the issuer, the local government financing vehicle. The relationship between political networks and issuance yield spreads is strengthened in areas where financial markets and legal systems are less developed.

Keywords: Political network; Guanxi; Local government financing vehicles; Municipal corporate bonds; Credit risk (search for similar items in EconPapers)
JEL-codes: G12 G14 G28 H74 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005158

DOI: 10.1016/j.frl.2021.102552

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