SHEN Xianghua:Bank Risk Identification, Government Subsidies and Corporate Debt Cost ——An Empirical Study Based on Data of Listed Companies from 2007 to 2012

Abstract  Bank credit is the most important source of capital for the Chinese enterprises, and the determinants of credit resource allocation and pricing mechanism are also the focuses of banks, enterprises, academia and other related parties.Based on theoretical analysis, this paper holds that, as a kind of implicit guarantee, fiscal subsidy can decrease debt cost by degrading the debt risk.Based on this, the paper takes the corporate data from the stock markets of Shanghai and Shenzhen from 2007 to 2012 as a sample and conducts an empirical research on the relationship among the bank's ability on risk identification, government subsidies and the corporate debt cost.The result indicates that banks have remarkable ability of risk identification on pricing the credit resource, and demand higher interest rates for high-risk companies.Government subsidies can reduce banks' risk assessment level, so as to reduce the cost of corporate credit financing.However, this effect is significant only when the fiscal subsidy is large enough to turn the high-risk corporate with negative operating profit into the profit-making corporate.This result shows that intensive and purposeful subsidies can optimize the allocation of credit resources when the banks pay attention to the management of credit risks.

Key words： Fiscal Subsidies    Risk Identification    Bank Credit    Debt Cost

Source: Finance & Trade Economics , No.9, 2014