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How Large is the Borrowing Cost Advantage of State-Owned Enterprises?

Author

Listed:
  • Jang Ping Thia
  • Xinyu Kong
  • Jiaqi Su

    (Asian Infrastructure Investment Bank (AIIB), Beijing, China)

Abstract

We provide new evidence of lower borrowing costs for state-owned enterprises (SOEs). Using ORBIS ownership data matched to financing transactions in syndicated loan and bond markets, regressions and propensity score matching estimates confirm the lower financing costs for advanced and developing economies’ SOEs, compared to private sector, and especially for hard currency borrowings. For loans, SOEs’ financing advantage is moderate. For bonds, the advantage is large and up to -120bps. Financing advantage differs slightly but is present for different state ownership stakes. This confirms that SOEs can, with the right conditions, be an effective conduit for state-related capital raising.

Suggested Citation

  • Jang Ping Thia & Xinyu Kong & Jiaqi Su, 2023. "How Large is the Borrowing Cost Advantage of State-Owned Enterprises?," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 13(1), pages 92-103.
    • Handle: RePEc:afj:journ3:v:13:y:2023:i:1:p:92-103
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-rdfin_v13_n1_a6
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    More about this item

    Keywords

    State–owned enterprise (SOE); syndicated loans; bonds;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G3 - Financial Economics - - Corporate Finance and Governance

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