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  • State-ownership and bank loan contracting

    Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance on 22/05/2017, available online: http://www.tandfonline.com/10.1080/1351847x.2017.1328454

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State-ownership and bank loan contracting: evidence from corporate fraud

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State-ownership and bank loan contracting : evidence from corporate fraud . / Hass, Lars Helge; Vergauwe, Skrålan ; Zhang, Zhifang.

In: European Journal of Finance, Vol. 25, No. 6, 2019, p. 550-567.

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Hass, Lars Helge ; Vergauwe, Skrålan ; Zhang, Zhifang. / State-ownership and bank loan contracting : evidence from corporate fraud . In: European Journal of Finance. 2019 ; Vol. 25, No. 6. pp. 550-567.

Bibtex

@article{df106a2d28534f68a015722be562ed1f,
title = "State-ownership and bank loan contracting: evidence from corporate fraud ",
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{\textquoteright}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.",
keywords = "state-ownership, corporate fraud, cost of debt, China",
author = "Hass, {Lars Helge} and Skr{\aa}lan Vergauwe and Zhifang Zhang",
note = "This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance on 22/05/2017, available online: http://www.tandfonline.com/10.1080/1351847x.2017.1328454",
year = "2019",
doi = "10.1080/1351847X.2017.1328454",
language = "English",
volume = "25",
pages = "550--567",
journal = "European Journal of Finance",
issn = "1351-847X",
publisher = "Routledge",
number = "6",

}

RIS

TY - JOUR

T1 - State-ownership and bank loan contracting

T2 - evidence from corporate fraud

AU - Hass, Lars Helge

AU - Vergauwe, Skrålan

AU - Zhang, Zhifang

N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance on 22/05/2017, available online: http://www.tandfonline.com/10.1080/1351847x.2017.1328454

PY - 2019

Y1 - 2019

N2 - 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.

AB - 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.

KW - state-ownership

KW - corporate fraud

KW - cost of debt

KW - China

U2 - 10.1080/1351847X.2017.1328454

DO - 10.1080/1351847X.2017.1328454

M3 - Journal article

VL - 25

SP - 550

EP - 567

JO - European Journal of Finance

JF - European Journal of Finance

SN - 1351-847X

IS - 6

ER -