Bank loan supply and corporate capital structure: Recent evidence from China

Jianfu SHEN, Michael FIRTH, Pui Han POON

Research output: Other Conference ContributionsConference Paper (other)Researchpeer-review

Abstract

This paper provides new evidence on the supply side effects on corporate capital structure in China. We find that bank-dependent firms, which are mainly large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to the case for small and private firms due to the inability of small and private firms to access bank loans. With their ability to substitute between different forms of capital, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than are small and private firms. During the credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matched firms; and small and private firms are shown to decrease leverage in this period. These findings lend support to the importance of supply side effects and bank loan segmentation on capital structure decisions.
Original languageEnglish
Publication statusPublished - 2 Jun 2015
EventJournal of Law, Finance, and Accounting (JLFA) 2015 International Conference - The Hong Kong Polytechnic University , Hung Hom, Hong Kong
Duration: 1 Jun 20152 Jun 2015
https://af.polyu.edu.hk/about/news-events/posts/2015/june/journal-of-law-finance-and-accounting-jlfa-2015-international-conference/

Conference

ConferenceJournal of Law, Finance, and Accounting (JLFA) 2015 International Conference
CountryHong Kong
CityHung Hom
Period1/06/152/06/15
Internet address

Fingerprint

Private firms
Bank loans
China
Small firms
Capital structure
Supply side
Side effects
Leverage ratio
Substitute
Segmentation
Loans
Leverage
Equity financing
Credit booms

Cite this

SHEN, J., FIRTH, M., & POON, P. H. (2015). Bank loan supply and corporate capital structure: Recent evidence from China. Paper presented at Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference, Hung Hom, Hong Kong.
SHEN, Jianfu ; FIRTH, Michael ; POON, Pui Han. / Bank loan supply and corporate capital structure: Recent evidence from China. Paper presented at Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference, Hung Hom, Hong Kong.
@conference{8a049f07b4f743b19df4fc0455357481,
title = "Bank loan supply and corporate capital structure: Recent evidence from China",
abstract = "This paper provides new evidence on the supply side effects on corporate capital structure in China. We find that bank-dependent firms, which are mainly large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to the case for small and private firms due to the inability of small and private firms to access bank loans. With their ability to substitute between different forms of capital, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than are small and private firms. During the credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26{\%} and 2.76{\%} more than matched firms; and small and private firms are shown to decrease leverage in this period. These findings lend support to the importance of supply side effects and bank loan segmentation on capital structure decisions.",
author = "Jianfu SHEN and Michael FIRTH and POON, {Pui Han}",
year = "2015",
month = "6",
day = "2",
language = "English",
note = "Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference ; Conference date: 01-06-2015 Through 02-06-2015",
url = "https://af.polyu.edu.hk/about/news-events/posts/2015/june/journal-of-law-finance-and-accounting-jlfa-2015-international-conference/",

}

SHEN, J, FIRTH, M & POON, PH 2015, 'Bank loan supply and corporate capital structure: Recent evidence from China' Paper presented at Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference, Hung Hom, Hong Kong, 1/06/15 - 2/06/15, .

Bank loan supply and corporate capital structure: Recent evidence from China. / SHEN, Jianfu; FIRTH, Michael; POON, Pui Han.

2015. Paper presented at Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference, Hung Hom, Hong Kong.

Research output: Other Conference ContributionsConference Paper (other)Researchpeer-review

TY - CONF

T1 - Bank loan supply and corporate capital structure: Recent evidence from China

AU - SHEN, Jianfu

AU - FIRTH, Michael

AU - POON, Pui Han

PY - 2015/6/2

Y1 - 2015/6/2

N2 - This paper provides new evidence on the supply side effects on corporate capital structure in China. We find that bank-dependent firms, which are mainly large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to the case for small and private firms due to the inability of small and private firms to access bank loans. With their ability to substitute between different forms of capital, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than are small and private firms. During the credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matched firms; and small and private firms are shown to decrease leverage in this period. These findings lend support to the importance of supply side effects and bank loan segmentation on capital structure decisions.

AB - This paper provides new evidence on the supply side effects on corporate capital structure in China. We find that bank-dependent firms, which are mainly large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to the case for small and private firms due to the inability of small and private firms to access bank loans. With their ability to substitute between different forms of capital, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than are small and private firms. During the credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matched firms; and small and private firms are shown to decrease leverage in this period. These findings lend support to the importance of supply side effects and bank loan segmentation on capital structure decisions.

M3 - Conference Paper (other)

ER -

SHEN J, FIRTH M, POON PH. Bank loan supply and corporate capital structure: Recent evidence from China. 2015. Paper presented at Journal of Law, Finance, and Accounting (JLFA) 2015 International Conference, Hung Hom, Hong Kong.