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Corporate foreign bond issuance and interfirm loans in China

Yi Huang (), Ugo Panizza and Richard Portes
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Yi Huang: IHEID, Graduate Institute of International and Development Studies, Geneva, http://graduateinstitute.ch/home/study/academicdepartments/international-economics.html
Richard Portes: London Business School, CEPR and NBER

No 06-2018, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper uses firm-level data to document and analyze international bond issuance by Chinese non-financial corporations and the use of the proceeds of issuance. We find that dollar issuance is positively correlated with the differential between domestic and foreign interest rates. This interest rate differential increases the likelihood of dollar bond issuance by risky rms and decreases the likelihood of dollar bond issuance of exporters and profitable firms. Moreover, and most strikingly, we find that risky firms do more inter-firm lending than non-risky firms and that this lending rose significantly after the regulatory shock of 2008-09, when the authorities sought to restrict the financial activities of risky firms. Risky firms try to boost profitability by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation that limits risk-taking by financial firms.

Keywords: China; bond markets in emerging markets; carry trade; shadow banking (search for similar items in EconPapers)
JEL-codes: F34 F32 G15 G30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-fmk, nep-ifn and nep-tra
Date: 2018-04
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Working Paper: Corporate foreign bond issuance and interfirm loans in China (2018) Downloads
Working Paper: Corporate Foreign Bond Issuance and Interfirm Loans in China (2018) Downloads
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