The Impact of Corporate Governance and State Ownership on the Default Probabilities of Chinese Firms

Since 2014, the Chinese government has sanctioned corporate bond defaults of both state-owned and non-state-owned firms. This study investigates the impact of state ownership on corporate governance mechanisms on the default risk of Chinese firms. Some similarities and differences in the effects of governance mechanisms are observed. Institutional reduces default risk for both types of firms. Non-state-owned firms that are family owned and more independent boards show higher default risk. Contrastingly, state-owned firms with larger boards and less independent boards exhibit lower default risk. Pandemic effects are mitigated for state owned firms