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ID:
141173
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| Summary/Abstract |
Strong credit expansion in China after the recent global financial crisis has brought local government financial vehicles (LGFV) into the spotlight. Rapid growth of LGFV has triggered concern about local government indebtedness, banks' asset quality and, more broadly, China's medium-term financial stability and sovereign risk. This paper constructs a unique firm-level dataset to evaluate the country's local government debt. We find an uneven distribution of LGFV, which are concentrated in the coastal areas, and a deterioration of their debt repaying ability from 2010 to 2012. We use principal component analysis (PCA) along with multivariate discriminate analysis (MDA) to identify the credit risk of LGFV based on conventional financial variables as well as local governments' fiscal status. We also estimate the safe boundaries of debt bearing at the provincial government level. The estimations reveal more severe local government debt risks in the middle-western provinces and higher risks associated with LGFV at the municipal and county levels. Although it is very unlikely that there will be a national debt crisis in China, the high risk of LGFV should be noted and effectively controlled by improving the fiscal transparency of local governments and reforming the fiscal system.
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| 2 |
ID:
135014
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| Summary/Abstract |
This paper investigates the effects of market power on credit risk, revenue diversification and bank stability in selected Association of Southeast Asian Nations (ASEAN) member countries (Indonesia, Malaysia, the Philippines, Thailand and Vietnam) using a sample of 153 commercial banks during 1998–2010. The authors find that bank market power is positively associated with credit risk and revenue diversification. Nevertheless, these associations diminished during the global financial crisis (GFC), implying that banks with greater market power have been better able to manage their non-performing loans during the crisis period. Bank stability, however, is not associated with market power. Instead, it is found to be a negative function of state ownership, asset composition and banking freedom. Overall, even though ASEAN banks with greater market power have higher credit risk, they are more diversified, thus leaving their overall bank risk unaffected.
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| 3 |
ID:
075512
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