Inside the black box : bank credit allocation in China’s private sector

Michael Arthur FIRTH, Chen LIN, Ping LIU, Sonia Man-lai WONG

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

173 Citations (Scopus)

Abstract

This study examines how the Chinese state-owned banks allocate loans to private firms. We find that the banks extend loans to financially healthier and better-governed firms, which implies that the banks use commercial judgments in this segment of the market. We also find that having the state as a minority owner helps firms obtain bank loans and this suggests that political connections play a role in gaining access to bank finance. In addition, we find that commercial judgments are important determinants of the lending decisions for manufacturing firms, large firms, and firms located in regions with a more developed banking sector; political connections are important for firms in service industries, large firms, and firms located in areas with a less developed banking sector.
Original languageEnglish
Pages (from-to)1144-1155
Number of pages12
JournalJournal of Banking and Finance
Volume33
Issue number6
DOIs
Publication statusPublished - 1 Jun 2009

Fingerprint

Credit allocation
Bank credit
Black box
China
Private sector
Bank loans
Banking sector
Political connections
Large firms
Finance
Lending decisions
Service industries
Minorities
Private firms
Manufacturing firms
State-owned banks
Owners

Keywords

  • Bank loans
  • China
  • Lending decisions
  • Private sector

Cite this

FIRTH, Michael Arthur ; LIN, Chen ; LIU, Ping ; WONG, Sonia Man-lai. / Inside the black box : bank credit allocation in China’s private sector. In: Journal of Banking and Finance. 2009 ; Vol. 33, No. 6. pp. 1144-1155.
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Inside the black box : bank credit allocation in China’s private sector. / FIRTH, Michael Arthur; LIN, Chen; LIU, Ping; WONG, Sonia Man-lai.

In: Journal of Banking and Finance, Vol. 33, No. 6, 01.06.2009, p. 1144-1155.

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

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