Credit Expansion, corporate finance and overinvestment : recent evidence from China

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

Research output: Journal PublicationsJournal Article (refereed)peer-review

25 Citations (Scopus)


This paper examines the impacts of a recent credit expansion event on corporate policies in China. During the credit boom in 2009 and 2010, the large and state-owned firms increased leverage ratios by 2.89% and 1.68% (on a quarterly basis) more than their matched firms. State-owned firms had higher increases in loan financing and corporate investment than their matched firms due to government intervention and better access to the credit market. Small and non-state-owned firms had no significant change in loan financing but undertook less net equity issuance than did the matched firms during this stimulated boom. These findings shed significant light on the effects of bank lending segmentation on capital structure and corporate investment decisions in response to macroeconomic shocks in China.
Original languageEnglish
Pages (from-to)16-27
Number of pages12
JournalPacific-Basin Finance Journal
Early online date26 May 2016
Publication statusPublished - Sept 2016


  • Bank loan supply
  • corporate investment
  • corporate leverage
  • loan financing
  • net equity issuance

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