Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Fan Yu

Rights Information

© 2016 Zhengyang Xu


In this paper I analyzed the intra-industry competitive and contagion effect during bond defaults in China. The analysis is performed using bond price, since the Chinese stock market is immature and has incredible amount of volatility. The sample includes 15 cases of default across 10 different industries since 2014, and the cumulative effect of the industry portfolio is positive over 11-day event window (competitive effect) with a t-statistic of 6.22. In addition, I found that SOE defaults overall have a significant positive abnormal return on their industry portfolios during 11-day event window with a t-statistic of 4.72, indicating a competitive effect. In contrast, Non-SOE defaults overall have a significant negative abnormal return on their industry portfolios over 3-day window with a t-statistic of -3.36, showing a contagion effect. But this difference could be due to the characteristics of industries as opposed to the nature of SOE. By analyzing the condition and characteristics of each industry, I found that the significance of abnormal return depends on the level of competition of the industry and the level of information available. In terms of contagion and competitive effect, industries showing a contagion effect offer products that are difficult to differentiate, such as cement and water bottle. Industries showing a competitive effect offer products that are highly specialized and rely heavily on technology innovation, such as the special equipment industry and electric equipment industry.

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