How large is the borrowing cost advantage of state-owned enterprises?
Year: 2023
Content-Type: Research Paper
Description: The authors provide new evidence of lower borrowing costs for state-owned enterprises (SOEs). Utilizing ORBIS ownership data matched to financing transactions in syndicated loan and bond markets, regressions and propensity score matching estimates confirm the lower financing costs for SOEs in both advanced and developing economies when compared to the private sector. This advantage is particularly pronounced for hard currency borrowings. In the case of loans, the financing advantage for SOEs is considered moderate, while for bonds, it is substantial, reaching up to -120 basis points. The financing advantage exhibits slight variations but remains present for different levels of state ownership stakes. These findings affirm that, under the right conditions, SOEs can serve as effective conduits for state-related capital raising.
Pages: 20 pages
Author: Jang Ping Thia; Jiaqi Su; Xinyu Kong
Categories: Banks, Finance, Investments, Publications, Risk
Tags: Banking, Finance, Investment, Risk Management