Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Infuences

Arnab Bhattacharjee; Jie Hany

Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Infuences

Arnab Bhattacharjee, Jie Hany

Research output: Working paper/Preprint › Discussion paper

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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 other economies highlights important policy implications.

Original language	English
Place of Publication	St. Andrews
Publisher	Scottish Institute for Research in Economics
Number of pages	39
Publication status	Published - 2010

Publication series

Name	SIRE Discussion Papers
Publisher	Scottish Institute for Research in Economics
No.	2010-53

Keywords

Financial distress
Macroeconomic instability
Cox Proportional Hazards Model
Unobserved Heterogeneity
Emerging economies

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SIRE DP 2010 53Final published version, 909 KB

1 Discussion paper

Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Influences
Bhattacharjee, A. & Han, J., 2010, St. Andrews: Centre for Research into Industry, Enterprise, Finance and the Firm, 38 p. (CRIEFF Discussion Papers; no. 1001).
Research output: Working paper/Preprint › Discussion paper

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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 other economies highlights important policy implications.

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KW - Cox Proportional Hazards Model

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Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Infuences

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Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Influences

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