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Government Deleveraging and Corporate Distress

2022; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4296428

1556-5068

Jiayin Hu, Songrui Liu, Yang Yao, Zhu Zong,

Risk Management in Financial Firms

Download This Paper Open PDF in Browser Add Paper to My Library Share: Permalink Using these links will ensure access to this page indefinitely Copy URL Government Deleveraging and Corporate Distress 59 Pages Posted: 23 Dec 2022 See all articles by Jiayin HuJiayin HuPeking University - National School of Development (NSD); Peking University - China Center for Economic Research (CCER)Songrui LiuPeking University, National School of Development, StudentsYang YaoPeking UniversityZhu ZongNSD Date Written: December 7, 2022 Abstract We demonstrate how government deleveraging causes corporate distress in a distorted financial market. Our difference-in-differences (DID) analysis exploits China's top-down deleveraging policy in 2017, which targets shadow bank financing and reduces local governments' borrowing capacity. We find that after the government deleveraging, private firms with local government procurement contracts experienced larger accounts receivable increases, larger cash holdings reductions, and higher external financing costs. These firms also experienced more share-pledging activities by controlling shareholders, greater likelihoods of ownership changes, and deteriorated performance. We do not find similar effects among state-owned enterprises (SOEs), which enjoy funding privileges in China's financial system. Keywords: Deleveraging, shadow banking, local government debt, corporate distress, government procurement, financial distortions JEL Classification: G18, G28, G32, H57, H72, H74 Suggested Citation: Suggested Citation Hu, Jiayin and Liu, Songrui and Yao, Yang and Zong, Zhu, Government Deleveraging and Corporate Distress (December 7, 2022). Available at SSRN: https://ssrn.com/abstract=4296428 Jiayin Hu (Contact Author) Peking University - National School of Development (NSD) ( email ) 5 Yiheyuan RdBeijing, China 100871 HOME PAGE: http://nsd.pku.edu.cn/szdw/qzjs/h/496603.htm Peking University - China Center for Economic Research (CCER) 5 Yiheyuan RdBeijing, China 100871 Songrui Liu Peking University, National School of Development, Students ( email ) BeijingChina Yang Yao Peking University ( email ) No. 38 Xueyuan RoadHaidian DistrictBeijing, Beijing 100871China Zhu Zong NSD ( email ) Beijing, 100871China Download This Paper Open PDF in Browser Do you have a job opening that you would like to promote on SSRN? Place Job Opening Paper statistics Downloads 2 Abstract Views 22 PlumX Metrics Feedback Feedback to SSRN Feedback (required) Email (required) Submit If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. Submit a Paper Section 508 Text Only Pages SSRN Quick Links SSRN Solutions Research Paper Series Conference Papers Partners in Publishing Jobs & Announcements Special Topic Hubs SSRN Rankings Top Papers Top Authors Top Organizations About SSRN SSRN Objectives Network Directors Presidential Letter Announcements Contact us FAQs Copyright Terms and Conditions Privacy Policy We use cookies to help provide and enhance our service and tailor content. To learn more, visit Cookie Settings. This page was processed by aws-apollo-4dc in 0.096 seconds