Inside the black box: Bank credit allocation in China's private sector

Michael Firth, Chen Lin, Ping Liu and Sonia M.L. Wong

Journal of Banking & Finance, 2009, vol. 33, issue 6, 1144-1155

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.

Keywords: Bank; loans; Lending; decisions; Private; sector; China (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (190)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:6:p:1144-1155

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