Anti-corruption effects on the credit risk of local financing vehicles and the pricing of Chengtou bonds: Evidence from a quasi-natural experiment in China

Ningyu Qian

Finance Research Letters, 2018, vol. 26, issue C, 162-168

Abstract: We investigate the causal effects of anti-corruption on the credit risk of local financing vehicles (LFVs) and the pricing of Chengtou bonds (CBs) in China. Difference-in-differences estimates show that anti-corruption decreases LFVs’ earnings, thereby increasing LFVs’ credit risk. This corresponds to a reduction in LFVs’ nonoperating incomes, and the greatest reduction of earnings occurs among LFVs investing in public infrastructure. Finally, we find that credit risk mispricing occurs in the primary market.

Keywords: Corruption; Local financing vehicles; Credit risk; Chengtou bond; Pricing (search for similar items in EconPapers)
JEL-codes: D7 G1 G3 H7 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:26:y:2018:i:c:p:162-168

DOI: 10.1016/j.frl.2018.01.001

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