Credit Expansion, corporate finance and overinvestment : recent evidence from China
Document Type
Journal article
Source Publication
Pacific-Basin Finance Journal
Publication Date
9-2016
Volume
39
First Page
16
Last Page
27
Publisher
Elsevier BV
Keywords
Bank loan supply, corporate investment, corporate leverage, loan financing, net equity issuance
Abstract
This paper examines the impacts of a recent credit expansion event on corporate policies in China. During the credit boom in 2009 and 2010, the large and state-owned firms increased leverage ratios by 2.89% and 1.68% (on a quarterly basis) more than their matched firms. State-owned firms had higher increases in loan financing and corporate investment than their matched firms due to government intervention and better access to the credit market. Small and non-state-owned firms had no significant change in loan financing but undertook less net equity issuance than did the matched firms during this stimulated boom. These findings shed significant light on the effects of bank lending segmentation on capital structure and corporate investment decisions in response to macroeconomic shocks in China.
DOI
10.1016/j.pacfin.2016.05.004
Print ISSN
0927538X
Publisher Statement
Copyright © 2016 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
Shen, J., Firth, M., & Poon, W. P. H. (2016). Credit Expansion, corporate finance and overinvestment: Recent evidence from China. Pacific-Basin Finance Journal, 39, 16-27. doi: 10.1016/j.pacfin.2016.05.004