File Download
Supplementary

postgraduate thesis: Banking, corporate capital structure, and the real economy

TitleBanking, corporate capital structure, and the real economy
Authors
Issue Date2015
PublisherThe University of Hong Kong (Pokfulam, Hong Kong)
Citation
Jiang, Y. [蒋一乐]. (2015). Banking, corporate capital structure, and the real economy. (Thesis). University of Hong Kong, Pokfulam, Hong Kong SAR. Retrieved from http://dx.doi.org/10.5353/th_b5570791
AbstractThis dissertation consists of two independent essays on banking, corporate capital structure, and the real economy, with evidence from China and the United States. The first essay examines how relationship bank health affects a firm’s debt choices. After identifying firms’ own relationship banks, we apply logistic regression on rated firms in the US between 1998 and 2013. We find that, when the leverage of a firm’s relationship bank decreases, the firm will be more likely to issue public bonds. The leverage of the whole banking sector has a similar impact, which is 1.35 times that of a firm’s relationship bank’s leverage. As for contract design changes, average loan size slightly decreased, while average bond size significantly increased; the maturity of both loans and bonds significantly shortened; the cost of loans and bonds rocketed to a very high level during the crisis period. Overall, this essay provides evidence of the supply-side effect of corporate debt structure and shows that bank health and leverage have an effect on firms’ choices between bank loans and public bonds. This essay adds to the literature by putting forward a new credit supply-side effect, to understand how firms’ debt structure varies, a matter which has been much explored with regard to demand-side effect. Apart from that, we use a more general and direct measure to capture bank health and its lending behaviour through the effect of leverage. The second essay examines the cyclicality of equity and liabilities financing of listed firms in China. First we find that simple correlation does not give us robust cyclicality results. We argue that this is largely due to small observations in calculating simple correlations. Next, we perform panel regressions controlling firm characteristics and year and firm fixed effects. We find that equity financing is pro-cyclical for all firm groups, while liabilities financing is pro-cyclical for only mid-large firm groups. To finance asset increment during economic recovery, small firms rely more on equity financing, while large firms rely more on liabilities financing. Lastly, we examine the cyclicality of corporate leverage using the same framework. We find that only some large firms’ leverages move counter-cyclically with the real economy. The similar cyclicality of equity finance and liabilities finance cancels each other such that the cyclicality of corporate leverage is affected and differs across different firms. Overall, this essay shows that economic conditions affect equity and liabilities financing of Chinese listed firms. Most firms have similar pro-cyclicality of equity and debt financing. Compared with firms in the US, firms in China rely more on equity markets but less on liabilities markets during economic upturn, especially for small firms. This essay adds to the literature by applying standard methodologies to listed firms in China, to make comparisons with US firms. More importantly, this essay shows that the discrepancy in the results of corporate leverage cyclicality in Chinese literature is understandable and is partly due to the similar cyclicality pattern of equity and liabilities finance.
DegreeDoctor of Philosophy
SubjectBusiness cycles
Corporations - Finance
Banks and banking
Dept/ProgramEconomics and Finance
Persistent Identifierhttp://hdl.handle.net/10722/219997

 

DC FieldValueLanguage
dc.contributor.authorJiang, Yile-
dc.contributor.author蒋一乐-
dc.date.accessioned2015-10-08T23:12:19Z-
dc.date.available2015-10-08T23:12:19Z-
dc.date.issued2015-
dc.identifier.citationJiang, Y. [蒋一乐]. (2015). Banking, corporate capital structure, and the real economy. (Thesis). University of Hong Kong, Pokfulam, Hong Kong SAR. Retrieved from http://dx.doi.org/10.5353/th_b5570791-
dc.identifier.urihttp://hdl.handle.net/10722/219997-
dc.description.abstractThis dissertation consists of two independent essays on banking, corporate capital structure, and the real economy, with evidence from China and the United States. The first essay examines how relationship bank health affects a firm’s debt choices. After identifying firms’ own relationship banks, we apply logistic regression on rated firms in the US between 1998 and 2013. We find that, when the leverage of a firm’s relationship bank decreases, the firm will be more likely to issue public bonds. The leverage of the whole banking sector has a similar impact, which is 1.35 times that of a firm’s relationship bank’s leverage. As for contract design changes, average loan size slightly decreased, while average bond size significantly increased; the maturity of both loans and bonds significantly shortened; the cost of loans and bonds rocketed to a very high level during the crisis period. Overall, this essay provides evidence of the supply-side effect of corporate debt structure and shows that bank health and leverage have an effect on firms’ choices between bank loans and public bonds. This essay adds to the literature by putting forward a new credit supply-side effect, to understand how firms’ debt structure varies, a matter which has been much explored with regard to demand-side effect. Apart from that, we use a more general and direct measure to capture bank health and its lending behaviour through the effect of leverage. The second essay examines the cyclicality of equity and liabilities financing of listed firms in China. First we find that simple correlation does not give us robust cyclicality results. We argue that this is largely due to small observations in calculating simple correlations. Next, we perform panel regressions controlling firm characteristics and year and firm fixed effects. We find that equity financing is pro-cyclical for all firm groups, while liabilities financing is pro-cyclical for only mid-large firm groups. To finance asset increment during economic recovery, small firms rely more on equity financing, while large firms rely more on liabilities financing. Lastly, we examine the cyclicality of corporate leverage using the same framework. We find that only some large firms’ leverages move counter-cyclically with the real economy. The similar cyclicality of equity finance and liabilities finance cancels each other such that the cyclicality of corporate leverage is affected and differs across different firms. Overall, this essay shows that economic conditions affect equity and liabilities financing of Chinese listed firms. Most firms have similar pro-cyclicality of equity and debt financing. Compared with firms in the US, firms in China rely more on equity markets but less on liabilities markets during economic upturn, especially for small firms. This essay adds to the literature by applying standard methodologies to listed firms in China, to make comparisons with US firms. More importantly, this essay shows that the discrepancy in the results of corporate leverage cyclicality in Chinese literature is understandable and is partly due to the similar cyclicality pattern of equity and liabilities finance.-
dc.languageeng-
dc.publisherThe University of Hong Kong (Pokfulam, Hong Kong)-
dc.relation.ispartofHKU Theses Online (HKUTO)-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThe author retains all proprietary rights, (such as patent rights) and the right to use in future works.-
dc.subject.lcshBusiness cycles-
dc.subject.lcshCorporations - Finance-
dc.subject.lcshBanks and banking-
dc.titleBanking, corporate capital structure, and the real economy-
dc.typePG_Thesis-
dc.identifier.hkulb5570791-
dc.description.thesisnameDoctor of Philosophy-
dc.description.thesislevelDoctoral-
dc.description.thesisdisciplineEconomics and Finance-
dc.description.naturepublished_or_final_version-

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats