China's "Mercantilist" government subsidies, the cost of debt and firm performance

• Main Authors: LIM, Chu Yeong, WANG, Jiwei, ZENG, Cheng (Colin)
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Government subsidies; cost of debt; firm performance; Accounting; Asian Studies; Corporate Finance; Economic Policy
• Online Access: https://ink.library.smu.edu.sg/soa_research/1766; https://ink.library.smu.edu.sg/context/soa_research/article/2793/viewcontent/China_Mercantilist_Subsidies_2017_afv.pdf
• Institution: Singapore Management University

China has been adopting a “mercantilist” policy by lavishing massive government subsidies on Chinese firms. Using hand-collected subsidy data on Chinese listed companies, we find that firms receiving more subsidies tend to have a lower cost of debt. However, such firms fail to have superior financia...