“Subsidies” or “taxes”? Corporate credit misallocation induced by the nexus of state-owned enterprises and state-owned banks

Xuehui Han, Ma. Christina Epetia and Yuan Cheng ()

Journal of Asian Economics, 2021, vol. 76, issue C

Abstract: Diverging from common claims made in the literature, this paper shows that “two-way” credit misallocation is linked to state ownership status. Specifically, not all Chinese state-owned firms benefit from their ownership status by obtaining lower interest costs as a type of subsidy. Some firms are subjected to higher interest costs as a form of tax. We report further evidence for the relationship between financial development and economic growth by accounting for heterogeneity in interstate banking coverage. From listed and unlisted firms’ data, we find that when the presence of state-owned banks is strong, state ownership-associated distortions in interest costs are more severe.

Keywords: Credit misallocation; State-owned banks; State-owned enterprises; Productivity gains (search for similar items in EconPapers)
JEL-codes: D23 G21 O16 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:76:y:2021:i:c:s1049007821000750

DOI: 10.1016/j.asieco.2021.101346

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