Structure Multiplicity and Market Outcomes:
Corporate Bond Issuances in China during 2009-2013
This dissertation examines the puzzle why state enterprises benefit more than non-state enterprises despite their poor performance and what methods non-state enterprises may use to compete with the protected state ones in emerging markets. Existing theories account for this puzzle through both agency theory, which views state ownership as a government guarantee, and institutional theory, which suggests that state enterprises are organic components of government policies in emerging economies. This research advances this literature by investigating the interplay of political and business structures in shaping a firm’s benefits. I analyze the effects of interactions between firms’ and banks’ state ownership (political structure) and firm-bank networks (business structure) on market outcomes when firms issue new debts. To support my analyses, I compiled an original data set of China’s corporate bond issuances from 2009-2013 associated with participant observations with a Chinese bank. This study draws on theories in inter-organizational relationship, sociology of finance, corporate political strategy, and political economy in emerging markets.
This dissertation consists of three parts. First, I examine how a firm’s state ownership and bank connections reinforce each other’s effect in shaping the size of bond that a firm issue. State firms have more access to multiple banks in bond issuance, which boosts firms’ power and status in firm-bank networks and consequently reinforces the advantages of state enterprises. Second, I investigate the interaction of a firm’s state ownership and bank connections in the determination of bond interest rates. In addition to the reinforcement effect, I examine how the effect of state ownership declines as firm-bank connections strengthen and how non-state firms use extensive bank connections to counteract the effect of state ownership. Finally, I study how banks’ state ownership and prior connections between themselves define the structures of underwriter syndicates. The structures of underwriter syndicates further mold the interest rates in each bond issuance. In summary, this dissertation uncovers the contingencies that firms’ and banks’ state ownership (political structure) and firm-bank connections (business structure) reinforce or counteract each other’s effect in emerging financial markets. The findings further suggest the negative impact of state ownership in emerging economies and the importance of organizational embeddedness in non-government networks in emerging markets.
This dissertation consists of three parts. First, I examine how a firm’s state ownership and bank connections reinforce each other’s effect in shaping the size of bond that a firm issue. State firms have more access to multiple banks in bond issuance, which boosts firms’ power and status in firm-bank networks and consequently reinforces the advantages of state enterprises. Second, I investigate the interaction of a firm’s state ownership and bank connections in the determination of bond interest rates. In addition to the reinforcement effect, I examine how the effect of state ownership declines as firm-bank connections strengthen and how non-state firms use extensive bank connections to counteract the effect of state ownership. Finally, I study how banks’ state ownership and prior connections between themselves define the structures of underwriter syndicates. The structures of underwriter syndicates further mold the interest rates in each bond issuance. In summary, this dissertation uncovers the contingencies that firms’ and banks’ state ownership (political structure) and firm-bank connections (business structure) reinforce or counteract each other’s effect in emerging financial markets. The findings further suggest the negative impact of state ownership in emerging economies and the importance of organizational embeddedness in non-government networks in emerging markets.