Published in:29th International Conference of the French Finance Association (AFFI) 2012
Extent:
1 Online-Ressource (31 p)
Language:
English
DOI:
10.2139/ssrn.2079457
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 7, 2012 erstellt
Description:
We analyze the determinants of debt choices for Chinese firms between bonds and syndicated loans. This issue helps appraising the weak development of bond market in China. We test if flotation costs, asymmetries of information, and renegotiation and liquidation costs, influence the choice of debt in the context of regulatory interference in the bond market. Using a dataset of 220 Chinese listed firms over the period 2006-2010, we check the role of central state ownership on debt choice to assess to what extent corporate debt choices are politically or economically driven. We find evidence in favor of the influence of central government ownership on the financing choices of firms it owns, as central state-owned firms are more likely to issue a bond. Furthermore, we identify that these companies tend to borrow uniquely on the bond market rather than tapping both debt markets. We provide evidence in favor of the flotation costs hypothesis, but provide mixed evidence for the information asymmetry hypothesis and rather reject the renegotiation and liquidation hypothesis. Our findings show that financial factors play a much minor role in corporate debt choices compared to other countries, whereas state ownership remain a key determinant of preferring the bond market