Stockholm School of Economics Asia Working Paper Series
Anders C. Johansson
The State Advances, the Private Sector Retreats: Firm Effects of China’s Great Stimulus Program
() and Xunan Feng
Abstract: It has been argued that the Chinese state sector is
advancing at the cost of the private sector. Focusing on publicly listed
firms which are divided into state- and private-controlled firms, we
investigate preferential access to debt and effects on firm performance.
Focusing on the large stimulus program launched in the fall of 2008, we
show that state-owned enterprises (SOEs) were better able to maintain their
leverage levels and had better access to debt of both short and long
maturities compared to privately controlled firms. Furthermore, we show
that political connections obtained through political participation help
mitigate the discrimination private firms faces in a transition economy
where the state controls capital allocation. We also find that preferential
access to debt financing does not help SOEs improve firm performance
relative to that of private firms. Political participation does however
help improve private firms’ performance. These results lend support to the
argument that the state is indeed advancing at the cost of the private
sector and that SOEs still face a broader set of goals than just profit
maximization and/or are less efficient than private firms.
Keywords: State-owned enterprises; private enterprises; fiscal and monetary stimulus; firm performance; capital structure; debt financing; political participation; political connections; China; (follow links to similar papers)
JEL-Codes: G30; G32; L33; P20; P26; (follow links to similar papers)
51 pages, August 22, 2013
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