The impact of corruption on firms’ access to bank loans: evidence from China

Peisen Liu, Houjian Li and Hua Guo

Economic Research-Ekonomska Istraživanja, 2020, vol. 33, issue 1, 1963-1984

Abstract: Current theories cannot explain the coexistence of China’s 40 years of rapid economic growth and its imperfect financial system, insufficient investor protection, and government intervention. This study empirically tests hypotheses regarding the effects of corruption on firms’ access to bank loans using econometric models based on survey data of 2,848 enterprises in China collected by the World Bank. The results show an inverted U-shaped relationship between corruption and firms’ access to bank loans: a low level of corruption increases firms’ access to bank loans, whereas a high level of corruption hinders firms from obtaining bank loans. Mild corruption may be a suboptimal choice for firms seeking bank loans, and bank funds allocation based on corruption can achieve Pareto optimality among firms. Moreover, government guarantees are conducive to firms’ access to financing and the link between corruption and firms’ access to bank loans can be explained by the role of government guarantees. The improvement of institutional quality is positively associated with firms’ access to bank loans and weakens the effects of corruption on firms’ external financing. This study thus sheds light on the real effects of corruption and the determinants of firms’ access to bank loans in developing countries.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/1331677X.2020.1768427 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:reroxx:v:33:y:2020:i:1:p:1963-1984

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rero20

DOI: 10.1080/1331677X.2020.1768427

Access Statistics for this article

Economic Research-Ekonomska Istraživanja is currently edited by Marinko Skare

More articles in Economic Research-Ekonomska Istraživanja from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().