Inside the black box : bank credit allocation in China’s private sector
Document Type
Journal article
Source Publication
Journal of Banking and Finance
Publication Date
6-1-2009
Volume
33
Issue
6
First Page
1144
Last Page
1155
Keywords
Bank loans, Lending decisions, Private sector, China
Abstract
This study examines how the Chinese state-owned banks allocate loans to private firms. We find that the banks extend loans to financially healthier and better-governed firms, which implies that the banks use commercial judgments in this segment of the market. We also find that having the state as a minority owner helps firms obtain bank loans and this suggests that political connections play a role in gaining access to bank finance. In addition, we find that commercial judgments are important determinants of the lending decisions for manufacturing firms, large firms, and firms located in regions with a more developed banking sector; political connections are important for firms in service industries, large firms, and firms located in areas with a less developed banking sector.
DOI
10.1016/j.jbankfin.2008.12.008
Print ISSN
03784266
E-ISSN
18726372
Funding Information
Financial support from Lingnan University (DR07B2) and an earmarked grant from the HKSAR (CERG LU340307) are greatly acknowledged.
Publisher Statement
Copyright © 2009 Elsevier B.V
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Lin, C., Liu, P., & Wong, S. M. L. (2009). Inside the black box: Bank credit allocation in China’s private sector. Journal of Banking & Finance, 33(6), 1144-1155. doi: 10.1016/j.jbankfin.2008.12.008