Corporate Bond Issuance From Birthplace‐Connected Politicians

ABSTRACT While numerous studies examine the impact of political factors on corporate bonds, there is scant literature focusing on the influence of politicians' birthplace favouritism on the likelihood of corporate bond issuance. To address this gap, we leverage turnover events of the chairman of the China Securities Regulatory Commission (CSRC) to identify shifts in regions favoured by politicians. Our findings reveal that firms headquartered in the birthplace of the incumbent CSRC chairman have a higher probability of issuing bonds. Channel analysis indicates that firms issuing bonds and headquartered in the incumbent CSRC chairman's birthplace are more likely to possess lower initial credit ratings and barely meet the CSRC's quantitative thresholds. The birthplace favouritism of politicians in corporate bond issuance is more pronounced among chairmen with strong hometown preferences and less pronounced when concerns about their political careers are high. Furthermore, the positive relationship between politicians' birthplace favouritism and bond issuance likelihood remains unaffected following the anti‐corruption campaign, highlighting that such favouritism is unlikely to be primarily driven by corrupt motives.