City commercial banks and credit allocation : Firm-level evidence

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dc.contributor Bank of Finland
dc.contributor.author Kang, Shulong
dc.contributor.author Dong, Jianfeng
dc.contributor.author Yu, Haiyue
dc.contributor.author Cao, Jin
dc.contributor.author Dinger, Valeriya
dc.date.accessioned 2021-03-09T11:23:56Z
dc.date.available 2021-03-09T11:23:56Z
dc.date.issued 2021
dc.identifier.isbn 978-952-323-369-0
dc.identifier.issn 1456-5889
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/17894
dc.description.abstract 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.
dc.description.tableofcontents Contents Abstract ..... 4 1 Introduction ..... 5 2 Institutional background and data ...... 9 2.1 Financial liberalization and the rise of CCBs...... 9 2.2 Summary of the data...... 10 3 Empirical analysis...... 12 3.1 Baseline regressions...... 12 3.2 Validating our identification strategy...... 14 3.2.1 Ruling out exogenous local shocks that correlate with the establishment of a CCB ....14 3.2.2 Exogeneity of establishment of CCBs ..... 16 3.3 Which firms benefit from establishment of CCBs? ....... 18 4 What mechanisms drive credit shifts following the establishment of a CCB? ...... 22 4.1 CCB establishment and municipal GDP growth...... 22 4.2 Credit allocation and promotion pressure ....... 26 4.3 Credit allocation and fiscal condition...... 27 4.4 Social welfare implications....... 28 5 Robustness check ....... 30 5.1 Different fixed effects ....... 30 5.2 Impact on private start-ups....... 31 5.3 Sub-sample analysis...... 32 6 Conclusion...... 33 References ....... 35 Appendix ...... 39 A Summary statistics....... 39 B Estimates for all variables in baseline regressions..... 40 C Probability distribution of placebo test ..... 41
dc.format.extent 42
dc.language.iso ENG
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject Bofit-kokoelma
dc.subject Kiina
dc.subject.other banking liberalization
dc.subject.other city commercial banks
dc.subject.other bank lending
dc.subject.other credit allocation
dc.subject.other political economy in banking
dc.title City commercial banks and credit allocation : Firm-level evidence
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-202103091126
dc.subject.jel D7
dc.subject.jel G21
dc.subject.jel G32
dc.subject.jel G38
dc.subject.jel P2
dc.series.name BOFIT Discussion Papers
dc.series.year 2021
dc.series.number 4/2021
dc.series.sortingnumber 0004
dc.date.publication 9.3.2021
dc.subject.yso liikepankit
dc.subject.yso yritykset
dc.subject.yso pankit
dc.subject.yso rahoitus
dc.subject.yso luotot
dc.subject.yso luotonanto
dc.contributor.orgunit Bank of Finland Institute for Emerging Economies (BOFIT)
dc.type.okm D4

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