Ligang Zhong

The Effect of Access to Public Debt Market on Chinese Firms Leverage

Publicly traded firms in China rely heavily on equity financing and are constrained in debt financing. Gaining access to the public debt market substantially alleviates the constraint. The debt ratio of the firms that have access to the public debt market is approximately 14 percent higher than the firms without access. Everything else being equal, gaining access to the public debt market significantly increases the debt ratio by 3.44 percent, and this increase is concentrated in long-term debt. We further find that non-SOEs enjoy greater benefits from access to the public debt market than SOEs, as evidenced by an increase in their total debt ratio and long-term debt ratio. For SOEs, the increase in long-term debt is offset by the decrease in short-term debt, which results in no change in total debt ratio. Our findings suggest the importance of access to the public debt market for Chinese firms, especially for non-SOEs that do not have privileged access to capital as do the SOEs.

What drives the high moments of hedge fund returns

ABSTRACT We study the high-moment distribution of hedge fund returns and identify factors that drive high-moment risk. Using hedge fund monthly returns, we find a strong correlation between the first four moments of returns (i.e. mean, standard deviation (SD), skewness, and kurtosis) and different characteristics of the funds such as leverage, liquidity, incentives, and strategy-related factors. We find that after controlling for other factors, incentives-related factors and a hedge fund’s specific strategy have the greatest impact on the distribution of fund returns. Our evidence also suggests investors allocate across hedge fund characteristics while placing greater emphasis on fund strategies and incentive factors.