Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China

Jianfu SHEN, Michael Arthur FIRTH, Pui Han, Winnie POON

Research output: Other Conference ContributionsPresentationPresentation

Abstract

This paper provides new evidence of supply side effects on corporate capital structure in China. We find that bank-dependent firms, that are large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to small and private firms due to their ability to access bank loans. With ability to substitute different forms of capital sources, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than small and private firms. During credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matching 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 - 4 Jul 2014
EventWorld Finance Conference 2014 - Ca` Foscari University, Venice, Italy
Duration: 2 Jul 20144 Jul 2014
https://www.world-finance-conference.com/conference.php?id=6

Conference

ConferenceWorld Finance Conference 2014
CountryItaly
CityVenice
Period2/07/144/07/14
Internet address

Fingerprint

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

Cite this

SHEN, J., FIRTH, M. A., & POON, P. H. W. (2014). Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China. World Finance Conference 2014, Venice, Italy.
SHEN, Jianfu ; FIRTH, Michael Arthur ; POON, Pui Han, Winnie. / Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China. World Finance Conference 2014, Venice, Italy.
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title = "Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China",
abstract = "This paper provides new evidence of supply side effects on corporate capital structure in China. We find that bank-dependent firms, that are large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to small and private firms due to their ability to access bank loans. With ability to substitute different forms of capital sources, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than small and private firms. During credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26{\%} and 2.76{\%} more than matching 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.",
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SHEN, J, FIRTH, MA & POON, PHW 2014, 'Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China' World Finance Conference 2014, Venice, Italy, 2/07/14 - 4/07/14, .

Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China. / SHEN, Jianfu; FIRTH, Michael Arthur; POON, Pui Han, Winnie.

2014. World Finance Conference 2014, Venice, Italy.

Research output: Other Conference ContributionsPresentationPresentation

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T1 - Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China

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AU - FIRTH, Michael Arthur

AU - POON, Pui Han, Winnie

PY - 2014/7/4

Y1 - 2014/7/4

N2 - This paper provides new evidence of supply side effects on corporate capital structure in China. We find that bank-dependent firms, that are large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to small and private firms due to their ability to access bank loans. With ability to substitute different forms of capital sources, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than small and private firms. During credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matching 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 of supply side effects on corporate capital structure in China. We find that bank-dependent firms, that are large and state-owned companies in China, increase (decrease) their leverage ratios if loan supplies increase (decrease) relative to small and private firms due to their ability to access bank loans. With ability to substitute different forms of capital sources, large and state-owned firms are relatively less (more) likely to use internal funds and equity financing when bank loans are (not) available than small and private firms. During credit boom in 2009 and 2010, the large and state-owned firms increase leverage ratios by 2.26% and 2.76% more than matching 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.

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SHEN J, FIRTH MA, POON PHW. Bank Loan Supply and Corporate Capital Structure: Recent Evidence from China. 2014. World Finance Conference 2014, Venice, Italy.