Government ownership and the cost of debt for Chinese listed corporations |
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| Institution: | 1. HEC Paris, France;2. Schulich School of Business, York University, Canada;3. Virginia Polytechnic Institute and State University, United States;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, PR China;2. Institute for Financial and Accounting Studies, Xiamen University, Xiamen, PR China;3. School of Management, Xiamen University, Xiamen, PR China;4. School of Management, Fudan University, Shanghai, PR China;1. University of International Business and Economics, China;2. Sy Syms School of Business, Yeshiva University, United States;3. C. T. Bauer College of Business, University of Houston, Houston, TX 77204-6021, United States;4. Von Allmen School of Accountancy, University of Kentucky, United States |
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| Abstract: | This study investigates the impact of government controlling ownership on the cost of debt of Chinese listed corporations. We find that corporations under government control have a lower cost of debt compared to corporations under private control, and that government ownership is most beneficial when firms exhibit financial distress, have high excess shareholder control, or operate in provinces with low institutional development. Our evidence that government ownership plays an important role in reducing Chinese firms' cost of debt may help explain why government involvement in business corporations remains prevalent in China after decades of economic reform. |
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