City commercial banks and credit allocation: Firm-level evidence

Arbeitspapier

This paper investigates how government-led banking liberalization affects credit allocation by banks using as a quasi-natural experiment the establishment of city commercial banks (CCBs) in China. Based on more than three million corporate financial statements spanning over 16 years, we find that the establishment of CCBs led to a 6-14 % drop in debt funding for private firms, as well as a 1-2 % rise in their funding costs. At the same time, private infrastructure firms enjoyed a nearly 6 % increase in debt funding and more than 100-basis-point drop in interest costs despite their inferior credit quality. The debt financing of private firm appears most severely affected in municipalities where officials face high promotional pressures or fiscal constraints.

Object Details

• ISBN: 978-952-323-369-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 4/2021

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Corporate Finance and Governance: Government Policy and Regulation
• Subject: banking liberalization ; city commercial banks ; bank lending ; credit allocation ; political economy in banking

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kang, Shulong ; Dong, Jianfeng ; Yu, Haiyue ; Cao, Jin ; Dinger, Valeriya
• Event: Veröffentlichung
• (who): Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT)
• (where): Helsinki
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/240382
• Last update: 10.03.2025, 11:43 AM CET