Topic: Political Uncertainty, State Ownership, and Credit Reallocation: Evidence from the Chinese Anti-corruption Campaign
We provide a novel empirical finding that the recent anti-corruption investigations in China are associated with credit reallocation from state-owned enterprises (SOE) to privately-owned, non-SOE firms. Our evidence suggests that industry specific competition effect dominates the contagion effect for non-SOE peers. This credit reallocation effect is more concentrated in short-term debt versus long-term debt and in bank loans versus corporate bonds, with higher investment efficiency and market share. The credit shifting towards non-SOE firms is also consistent with a supply-side explanation that we corroborate using an exogenous shock to the banking industry. Our findings imply that the anti-corruption campaign in China is beneficial to the economy due to more efficient credit allocation.
Hao Zhou is the Unigroup Chair Professor and Associate Dean at the PBC School of Finance; also the director of Monetary Policy and Financial Stability Research Center and the Deputy Chairman of National Institute of Financial Research at Tsinghua University. Before 2013, he was a senior economist the Federal Reserve Board, supervising systemically important financial institution and conducting macroprudential regulation policy. Hao was visiting professors at MIT and Peking University. He received a PhD degree in economics from Duke University in 2000 and BA and MA degrees in economics from Peking University.
Hao’s research agenda covers the areas of consumption-based asset pricing models with stochastic volatility, structural credit risk models and credit derivatives market, financial market volatility and return predictability, dynamic model of term structure of interest rate, realized jumps on financial market, currency risk premium dynamics, systemic risk of financial institutions, Chinese financial system and reforms. He has published in Journal of Finance, Review of Financial Studies, Journal of Financial Economics, and other leading economics and finance journals.
His research has been recognized by numerous academic and professional best paper awards, including China Financial Research Conference, CFA Institute, China International Conference in Finance, Crowell Memorial Prize of PanAgora Asset Management Inc., Chicago Quantitative Alliance (CQA), BankScope Prize of Australasian Finance and Banking Conference, among others. Hao was elected to the elite Thousand Talents Program in China as state’s specially recruited foreign expert and given the Best Teaching and Mentoring Award for graduate students by Tsinghua University.