Zhe Geng

The SOE Premium and Government Support in China's Credit Market

with Jun Pan

Journal of Finance, 79: 3041–3103, 2024.

Studying China's credit market using a structural default model that integrates credit risk, liquidity, and bailout, we document improved price discovery and a deepening divide between state-owned enterprises (SOEs) and non-SOEs. Government bailout support makes SOE bonds more valuable, while non-SOEs face heightened sensitivity to credit quality. In the real economy, non-SOEs experience severe performance deteriorations relative to SOEs, reflecting the spillovers of the credit market divide.

2021 CICF Best Paper Award. The 2025 Aoki Masahiko Nomination Award.

Presented at: NBER Capital Markets and the Economy 2021, FMA 2021, NFA 2021, CICF 2021, CICM 2021, CFRC 2021, CMES 2021, Sixth Annual Bank of Canada–Tsinghua PBCSF–University of Toronto Conference on the Chinese Economy, GISF 2022, SAIF, MIT Finance Student Workshop, CUHK Shenzhen, Peking HSBC, Tsinghua SEM, Johns Hopkins Carey Business School, Renmin University of China, UNSW Sydney.

Foreign Discount in International Corporate Bonds

R&R, Management Science, 2025.

In recent decades, over 40% of dollar-denominated corporate bonds have been issued by non-US firms. Strikingly, these foreign issuers face an extra discount of 20 bps compared to their US counterparts. Standard risks explain roughly one-third of this foreign discount, while Economic Policy Uncertainty accounts for about half. A Leland-type model with model uncertainty rationalizes these findings and links the discount to ambiguity about foreign firms' fundamentals.

Presented at: ABFER 2024, CICM 2022, CFRC 2022, SAIF, Tsinghua PBCSF, Fudan SOM, FiSF, SUFE SOF, SUSTech, BI Norwegian Business School, Tongji SEM, USTC.

The Government-Led Credit Cycle in China's LGFV Bonds and the Real Effects

with Ziqi Liu and Jun Pan

R&R, Journal of Financial Economics, 2025.

We identify a government-led credit cycle in Local Government Financing Vehicle (LGFV) bonds, featuring three waves of divergence between 2014 and 2022 followed by a sharp convergence after the 2023 "Debt Resolution" policy. The cycle is driven primarily by shifting market perceptions of central government bailout probability. The policy has dual effects on commercial banks: spillover benefits through pricing in high-risk cities, but also erosion of profitability and market share.

Presented at: The 2026 HKUST Finance Symposium, CICF 2026, The 2026 Masahiko Aoki Scholars Forum, The 12th Hong Kong Economic Association Biennial Conference, 2026 CES China Annual Conference.

Constructing Model-Based Cross-Section Factors in the Corporate Bond Market

with Jun Pan

Working Paper, 2025.

We extract three common risk factors — credit, duration, and liquidity — from corporate bond returns using a structural model with stochastic interest rates. The resulting theory-based three-factor model explains corporate bond risk premiums in both the aggregate and the cross-section. The model-implied factors identify flights-to-quality, flights-to-liquidity, and flights-to-cash episodes, and also help explain stock and sovereign bond returns.

Presented at: 2026 SAIF Annual Research Conference, CICF 2026, CFRC 2026.

Beta Ambiguity and Security Return Characteristics

with Tan Wang

Working Paper, 2020.

We study cross-sectional asset return properties under ambiguity. Expected returns are characterized by three factors that capture risk, mean ambiguity, and variance–covariance ambiguity, respectively, providing a unified lens on several return anomalies.

Presented at: WFA 2019, AFA Ph.D. Poster 2019, SERC 2019, CICF 2018.