Cultural barriers in China's corporate loans

Ming Jin, Fanglin Chen and Zhongfei Chen

Pacific-Basin Finance Journal, 2023, vol. 79, issue C

Abstract: This study uses listed companies and dialect data to examine how dialect diversity affects corporate unsecured loans. Through our analysis, we find that dialect diversity significantly reduces corporate unsecured loans. Mechanism analyses show that language barriers and social trust are external environmental mechanisms, while corporate transparency and overdue are internal mechanisms. Heterogeneity analyses indicate that corporate risk and asset intensity can increase the negative effect of dialect diversity. In addition, the effect of dialect diversity is only significant in groups with low financial development, low marketization, and high market segmentation. Furthermore, the negative effects of dialect diversity on corporate unsecured loans ultimately increase the burden on enterprises and their financial expense ratios. We provide a new perspective on the determinants of corporate collateral. Suggestions to reduce corporate unsecured loan constraints are provided at the end of this paper.

Keywords: Corporate unsecured loan; Dialect diversity; Informal institutions (search for similar items in EconPapers)
JEL-codes: G21 G30 Z1 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:79:y:2023:i:c:s0927538x23000525

DOI: 10.1016/j.pacfin.2023.101986

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