Credit Stimulus, Executive Ownership, and Firm Leverage

Rajdeep Chakraborti (), Sandeep Dahiya (), Lei Ge () and Pedro Gete
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Rajdeep Chakraborti: IE Business School, IE University, 28006 Madrid, Spain
Sandeep Dahiya: Georgetown University, McDonough School of Business, Washington, District of Columbia 20057
Lei Ge: Renmin University of China, Haidian District, Beijing 100872, China

Management Science, 2022, vol. 68, issue 10, 7682-7700

Abstract: We show that executive ownership is a significant driver of the demand for credit following credit expansion policies. Our focus on credit demand is in contrast to most studies that have focused on credit supply factors such as bank capital. Our identification exploits the large and unexpected Chinese credit expansion in 2008. This setting offers a unique advantage as in 2008 the Chinese government had almost complete control over the banking sector and it directed the banks to increase credit supply. Thus, in this setting, demand, rather than supply, largely drives the observed changes in firms’ borrowing. We provide extensive robustness tests to validate our results.

Keywords: China; credit policies; executive ownership; leverage (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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