Influence of Bank Loans on Listed Company Performance: Evidence from China

Zaoxing Hu and Jianing Zhang

A chapter in Comparative Analysis of Trade and Finance in Emerging Economies, 2023, vol. 31, pp 203-216 from Emerald Group Publishing Limited

Abstract: This research investigates the influence of bank loans on Chinese listed companies’ performance by collecting data on bank loan amounts and indicators used to measure performance, such as return on assets (ROA) and Tobin’s Q, semiannually from 2015 to 2020. Pooling panel regression models are employed to determine the relationship between firms’ performance and their amount of bank loans. This study contributes to the literature by controlling for additional bank loan characteristics and comparing the relevance between bank loans and bond issuance. The authors also find that the relationship between firm performance and bank loans shows a nonlinear concave relationship, suggesting the negative impact is more severe in the high loan-to-asset region. The subsample after 2018 shows a significantly positive relationship, indicating that the impact of COVID-19 might alter the prevalent relationship. In addition, short-term debt has a more noticeable negative impact on firm performance than long-term debt. Both results become weaker after COVID-19. This chapter can help listed companies to trade off using long-term or short-term bank loans as their debt financing methods and approach a better capital structure.

Keywords: Capital structure; bank loans; listed company performance; return on asset; Tobin’s Q; COVID-19; G30; G32; G39 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620230000031026

DOI: 10.1108/S1571-038620230000031026

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