Financial distress of Chinese firms: Microeconomic, macroeconomic and institutional influences

Arnab Bhattacharjee; Jie Han

doi:10.1016/j.chieco.2014.07.007

Financial distress of Chinese firms: Microeconomic, macroeconomic and institutional influences

Arnab Bhattacharjee^*, Jie Han

^*Corresponding author for this work

CSR Capital A/S

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

42 Citations (SciVal)

Abstract

We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for China and other economies highlights important policy implications. (C) 2014 Elsevier Inc. All rights reserved.

Original language	English
Pages (from-to)	244-262
Number of pages	19
Journal	China Economic Review
Volume	30
DOIs	https://doi.org/10.1016/j.chieco.2014.07.007
Publication status	Published - Sept 2014

Keywords

Financial distress
Macroeconomic instability
Cox proportional hazards model
Unobserved heterogeneity
Emerging economies
BUSINESS-CYCLE
CREDIT RISK
CORPORATE GOVERNANCE
COMPANY FAILURE
STOCK MARKETS
AGENCY COSTS
GROWTH
MODEL
TRANSITION
BANKRUPTCY

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title = "Financial distress of Chinese firms: Microeconomic, macroeconomic and institutional influences",

abstract = "We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for China and other economies highlights important policy implications. (C) 2014 Elsevier Inc. All rights reserved.",

keywords = "Financial distress, Macroeconomic instability, Cox proportional hazards model, Unobserved heterogeneity, Emerging economies, BUSINESS-CYCLE, CREDIT RISK, CORPORATE GOVERNANCE, COMPANY FAILURE, STOCK MARKETS, AGENCY COSTS, GROWTH, MODEL, TRANSITION, BANKRUPTCY",

author = "Arnab Bhattacharjee and Jie Han",

year = "2014",

month = sep,

doi = "10.1016/j.chieco.2014.07.007",

language = "English",

volume = "30",

pages = "244--262",

journal = "China Economic Review",

issn = "1043-951X",

publisher = "Elsevier",

}

TY - JOUR

T1 - Financial distress of Chinese firms

T2 - Microeconomic, macroeconomic and institutional influences

AU - Bhattacharjee, Arnab

AU - Han, Jie

PY - 2014/9

Y1 - 2014/9

N2 - We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for China and other economies highlights important policy implications. (C) 2014 Elsevier Inc. All rights reserved.

AB - We study the impact of both microeconomic factors and the macroeconomy on the financial distress of Chinese listed companies over a period of massive economic transition, 1995 to 2006. Based on an economic model of financial distress under the institutional setting of state protection against exit, and using our own firm-level measure of distress, we find important impacts of firm characteristics, macroeconomic instability and institutional factors on the hazard rate of financial distress. The results are robust to unobserved heterogeneity at the firm level, as well as those shared by firms in similar macroeconomic founding conditions. Comparison with related studies for China and other economies highlights important policy implications. (C) 2014 Elsevier Inc. All rights reserved.

KW - Financial distress

KW - Macroeconomic instability

KW - Cox proportional hazards model

KW - Unobserved heterogeneity

KW - Emerging economies

KW - BUSINESS-CYCLE

KW - CREDIT RISK

KW - CORPORATE GOVERNANCE

KW - COMPANY FAILURE

KW - STOCK MARKETS

KW - AGENCY COSTS

KW - GROWTH

KW - MODEL

KW - TRANSITION

KW - BANKRUPTCY

U2 - 10.1016/j.chieco.2014.07.007

DO - 10.1016/j.chieco.2014.07.007

M3 - Article

SN - 1043-951X

VL - 30

SP - 244

EP - 262

JO - China Economic Review

JF - China Economic Review

ER -

Financial distress of Chinese firms: Microeconomic, macroeconomic and institutional influences

Abstract

Keywords

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