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Anti-corruption effects on the credit risk of local financing vehicles and the pricing of Chengtou bonds: Evidence from a quasi-natural experiment in China

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  • Qian, Ningyu

Abstract

We investigate the causal effects of anti-corruption on the credit risk of local financing vehicles (LFVs) and the pricing of Chengtou bonds (CBs) in China. Difference-in-differences estimates show that anti-corruption decreases LFVs’ earnings, thereby increasing LFVs’ credit risk. This corresponds to a reduction in LFVs’ nonoperating incomes, and the greatest reduction of earnings occurs among LFVs investing in public infrastructure. Finally, we find that credit risk mispricing occurs in the primary market.

Suggested Citation

  • Qian, Ningyu, 2018. "Anti-corruption effects on the credit risk of local financing vehicles and the pricing of Chengtou bonds: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 26(C), pages 162-168.
    • Handle: RePEc:eee:finlet:v:26:y:2018:i:c:p:162-168
    DOI: 10.1016/j.frl.2018.01.001
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    Cited by:

    1. Jaehyuk Choi & Lei Lu & Heungju Park & Sungbin Sohn, 2022. "The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds," Papers 2201.01160, arXiv.org.
    2. Choi, Jaehyuk & Lu, Lei & Park, Heungju & Sohn, Sungbin, 2022. "The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds," Finance Research Letters, Elsevier, vol. 47(PA).
    3. Zhao, Meiyu & Zhang, Bo, 2023. "Credit corruption, financial constraint and corporate innovation: Evidence on China," Finance Research Letters, Elsevier, vol. 53(C).
    4. Mengkai Chen & Ting Chen & Debao Ruan & Xiaowei Wang, 2023. "Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China," Land, MDPI, vol. 12(8), pages 1-18, August.
    5. Shenghui Tong, 2022. "Corruption and anti‐corruption in China: a review and future research agenda," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 36(1), pages 3-16, May.
    6. Lenka Veselovská & Ján Závadský & Zuzana Závadská, 2020. "Mitigating bribery risks to strengthen the corporate social responsibility in accordance with the ISO 37001," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(4), pages 1972-1988, July.

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    More about this item

    Keywords

    Corruption; Local financing vehicles; Credit risk; Chengtou bond; Pricing;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G1 - Financial Economics - - General Financial Markets

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