Title

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

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

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