Signaling through government subsidy: Certification or endorsement

Ziqiao Yan and Yue Li

Finance Research Letters, 2018, vol. 25, issue C, 90-95

Abstract: We document the credit transmission channel of monetary policy in China by examining the signaling effect of government subsidies on the credit transmission process. We divide the signaling effect of government subsidies into a certification effect (indicating that firms have good quality) and an endorsement effect (indicating that firms have the recessive guarantee of government). Our results show that banks pay more attention to the endorsement effect of government subsidies when they make credit decisions, especially during tight money periods.

Keywords: Government subsidy; Signaling effect; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 G32 H25 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:25:y:2018:i:c:p:90-95

DOI: 10.1016/j.frl.2017.10.007

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