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State-ownership and bank loan contracting : evidence from corporate fraud
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Haß, Lars Helge, Vergauwe, Skrålan and Zhang, Zhifang (2019) State-ownership and bank loan contracting : evidence from corporate fraud. The European Journal of Finance, 25 (6). pp. 550-567. doi:10.1080/1351847X.2017.1328454
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WRAP-state-ownership-bank-loan-contracting-evidence-corporate-fraud-Zhang-2019.pdf - Accepted Version - Requires a PDF viewer. Download (1008Kb) | Preview |
Official URL: http://dx.doi.org/10.1080/1351847X.2017.1328454
Abstract
This paper explores the effect of borrower and lender state-ownership on the consequences of corporate fraud in the debt market. Fraud revelations can increase a firm’s information and credit risk, and are therefore expected to significantly affect future bank loan conditions. The Chinese economy provides a unique setting from which to study the influence of state-ownership on debt contracting because it is dominated by state-owned banks (SBs) and firms. Using a sample of bank loans and enforcement actions announced between 2001 and 2012, we find that, after fraud announcements, the cost of private debt increases significantly, but not for loans issued by SBs to state-owned enterprises (SOEs). Moreover, we find evidence that SBs grant, and SOEs receive, lower interest rates. Additional tests show that SOEs that received a more favorable interest rate after the announcement of fraud from a SB perform worse than other firms. These results indicate that despite the bank reforms SBs continue to favor SOEs and this could lead to sub-optimal lending.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance H Social Sciences > HV Social pathology. Social and public welfare |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Government ownership, Government ownership - China, Fraud, Corporations -- Corrupt practices -- China, Debts, Public, Debts, Public -- China | ||||||||
| Journal or Publication Title: | The European Journal of Finance | ||||||||
| Publisher: | Taylor & Francis | ||||||||
| ISSN: | 1351-847X | ||||||||
| Official Date: | 2019 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 22 July 2019 | ||||||||
| Volume: | 25 | ||||||||
| Number: | 6 | ||||||||
| Page Range: | pp. 550-567 | ||||||||
| DOI: | 10.1080/1351847X.2017.1328454 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 22 May 2017, available online: http://www.tandfonline.com/10.1080/1351847X.2017.1328454 | ||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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