Business

Political connection and credit risk of real estate enterprises: evidence from stock market

R. Chen, J. Yu, et al.

This groundbreaking paper explores the intricate link between political connections and credit risk in Chinese real estate firms. The research conducted by Rongda Chen, Jingjing Yu, Chenglu Jin, Xinyang Chen, Liu Yang, and Shuonan Zhang reveals that such connections can significantly increase credit risks, particularly for private enterprises, especially in the wake of burgeoning internet finance.

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Abstract

This paper investigates the relationship between political connection and credit risk of real estate enterprises, a topic not previously formally studied. Using panel data of 123 Chinese real estate listed companies from 2008-2021, the study finds a significant positive correlation between political connection and credit risk for private firms, attributed to excessive debt facilitated by these connections. The rise of internet finance since 2013 is shown to enhance this effect. The findings offer micro-level evidence on credit risk factors in China's recent real estate market crisis.

Publisher

Humanities & Social Sciences Communications

Published On

Jan 26, 2024

Authors

Rongda Chen, Jingjing Yu, Chenglu Jin, Xinyang Chen, Liu Yang, Shuonan Zhang

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