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Business groups and corporate bond costs: Evidence from China

Liubing Cheng, Yanyan Chen and Yan Zhang

Pacific-Basin Finance Journal, 2022, vol. 75, issue C

Abstract: We examine the effect of business groups on corporate bond costs. Using a sample of corporate bonds issued by Chinese privately owned firms from 2007 to 2019, we show that business group-affiliated firms issue bonds at higher yield spreads than independent firms. The results hold after addressing the endogeneity issues of self-selection, selection bias, and financing decisions. We do not find that corporate governance plays a role in mitigating the negative impact of business groups on bond costs. Business groups negatively affect bond costs through tunneling and risk spillover channels, whereas financing advantage is not a transmission channel.

Keywords: Business groups; Corporate bond costs; Tunneling; Risk spillover; Financial advantage (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x2200141x

DOI: 10.1016/j.pacfin.2022.101846

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Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

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