Who received interest-free loans during the COVID-19 pandemic?

Liuyong Yang, Kainan Li and Peng Wu

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: During the COVID-19 pandemic, the Chinese government implemented a series of policies to encourage banks to provide interest-free loans (IFLs) to small businesses. Using a unique dataset, we find that firms with closer relationships with their banks are more likely to obtain IFLs, particularly in areas with greater banking competition. Our results suggest that banks engage in this behavior to gain a competitive advantage in the local credit market.

Keywords: Small and medium-sized enterprises; Interest-free loans; Relationship lending; Bank competition; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: E32 E51 G21 G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006852

DOI: 10.1016/j.frl.2023.104313

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