The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds

Jaehyuk Choi; Lei Lu; Heungju Park; Sungbin Sohn

doi:10.1016/j.frl.2021.102552

The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds

Jaehyuk Choi
, Lei Lu
, Heungju Park
, Sungbin Sohn

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

This paper examines the effect of the political network of Chinese municipal leaders on the pricing of municipal corporate bonds. Using municipal leaders’ working experience to measure the political network, we find that this network reduces the bond issuance yield spreads by improving the credit ratings of the issuer, the local government financing vehicle. The relationship between political networks and issuance yield spreads is strengthened in areas where financial markets and legal systems are less developed.

Original language	English
Article number	102552
Journal	Finance Research Letters
Volume	47
DOIs	https://doi.org/10.1016/j.frl.2021.102552
State	Published - Jun 2022
Externally published	Yes

Keywords

Credit risk
Guanxi
Local government financing vehicles
Municipal corporate bonds
Political network

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10.1016/j.frl.2021.102552

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title = "The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds",

abstract = "This paper examines the effect of the political network of Chinese municipal leaders on the pricing of municipal corporate bonds. Using municipal leaders{\textquoteright} working experience to measure the political network, we find that this network reduces the bond issuance yield spreads by improving the credit ratings of the issuer, the local government financing vehicle. The relationship between political networks and issuance yield spreads is strengthened in areas where financial markets and legal systems are less developed.",

keywords = "Credit risk, Guanxi, Local government financing vehicles, Municipal corporate bonds, Political network",

author = "Jaehyuk Choi and Lei Lu and Heungju Park and Sungbin Sohn",

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year = "2022",

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language = "English",

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AU - Choi, Jaehyuk

AU - Lu, Lei

AU - Park, Heungju

AU - Sohn, Sungbin

PY - 2022/6

Y1 - 2022/6

N2 - This paper examines the effect of the political network of Chinese municipal leaders on the pricing of municipal corporate bonds. Using municipal leaders’ working experience to measure the political network, we find that this network reduces the bond issuance yield spreads by improving the credit ratings of the issuer, the local government financing vehicle. The relationship between political networks and issuance yield spreads is strengthened in areas where financial markets and legal systems are less developed.

AB - This paper examines the effect of the political network of Chinese municipal leaders on the pricing of municipal corporate bonds. Using municipal leaders’ working experience to measure the political network, we find that this network reduces the bond issuance yield spreads by improving the credit ratings of the issuer, the local government financing vehicle. The relationship between political networks and issuance yield spreads is strengthened in areas where financial markets and legal systems are less developed.

KW - Credit risk

KW - Guanxi

KW - Local government financing vehicles

KW - Municipal corporate bonds

KW - Political network

UR - https://www.scopus.com/pages/publications/85122423483

U2 - 10.1016/j.frl.2021.102552

DO - 10.1016/j.frl.2021.102552

M3 - Article

AN - SCOPUS:85122423483

SN - 1544-6123

VL - 47

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 102552

ER -

The financial value of the within-government political network: Evidence from Chinese municipal corporate bonds

Abstract

Keywords

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