Bank Credit Lines and Overinvestment: Evidence from China

Qianwei Ying, Danglun Luo and Lifan Wu

The International Journal of Business and Finance Research, 2013, vol. 7, issue 2, 43-52

Abstract: The paper investigates the relationship between bank credit lines and firms’ overinvestment for Chinese listed companies from 2001 to 2008. We find significant impacts of bank credit lines on firm overinvestment activities. Further, we find that overinvestment is mainly made by State-owned firms, and not privately-owned firms. State-owned firms have easier access to bank credit lines with cheaper cost than private-owned firms, and therefore are more likely to overinvest. The results suggest that concentration of credit lines among State-owned firms likely leads to low resource allocation efficiency.

Keywords: Credit Lines; Overinvestment; State-owned Firms (search for similar items in EconPapers)
JEL-codes: G21 G31 G38 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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