Ugo Panizza (Graduate Institute of International and Development Studies, Geneva) (webinar)

“Corporate foreign bond issuance and interfirm loans in China”

Seminar in Finance and Collegio Carlo Alberto Monday Lunch Seminar

Abstract: We use firm-level data to analyze international bond issuance by Chinese non-financial corporations. The interest rate differential between domestic and foreign interest rates increasesthe likelihood of dollar bond issuance by risky firms. Most strikingly, risky firms do  more interfirm lending than non-risky firms. This lending rose significantly after the authorities sought torestrict th e financial activities of risky firms in 2008-09. Risky firms try to boost profitability by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation that limits risk-taking by financial firms.
Keywords: China, bond markets in emerging market countries, carry trade, shadow banking
JEL Codes: F34, F32, G15, G30

Joint with Yi Huang and Richard Portes.