Financial Crisis, Bailout and Corporate Capital Structural Adjustment: Evidence from China

Deming Luo (Visiting Scholar, Zhejiang University)

Abstract

This research considers the spillover effect of bailout policy. We identify zombies and construct the region-industry bailout exposure index. We show that when firms suffer a secular negative financial shock, SOEs accumulate the leverage while NSOEs deleverage their capital structure; Both SOEs and NSOEs are reluctant to deleverage their capital structure when they are exposed to the region-industry bailout policy. These results are robust.