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Banks' Lending Behavior and Firms' Corporate Financing Pattern in the People's Republic of China

dc.contributor.authorSayuri Shirai
dc.description.abstractThis paper examines whether the banking sector reforms and equity market development have made any noticeable impact on banks lending behavior and firms corporate financing patterns in the Peoples Republic of China (PRC). Based on data on 1,098 publicly listed firms, it has been found that banks lending biases have been present especially toward large and less profitable firms and firms with greater State ownership throughout 1994-2000, and toward old firms during 1998-2000. Since most of these firms have been poorer performers than other firms, the results indicate the presence of a soft budget constraint. Moreover, this paper has also found that less profitable, large, and old firms have faced favorable lending bias after the initial public offerings (IPOs) on A-shares. The fact that these firms prefer bank loans over equity finance despite rising stock prices (hence lowering equity financing cost) suggests that banks either provided favorable financing conditions which may be due to collusion, or lack of borrowers incentive to diversify their financing sources. It is concluded that the banking sector reforms need to be strengthened further in order to improve their risk management skills and lower lending biases. On the other hand, lending bias towards firms with greater State ownership was also present, but the bias has declined after the IPOs. These firms seem to have increased greater recourse to total equity finance by issuing more non-negotiable shares than A-shares, probably to maintain management controls.
dc.publisherAsian Development Bank Institute
dc.rightsCC BY 3.0 IGO
dc.titleBanks' Lending Behavior and Firms' Corporate Financing Pattern in the People's Republic of China
dc.typeWorking Papers
dc.subject.expertEconomic Development
dc.subject.expertEconomic Infrastructure
dc.subject.expertEconomic Policies
dc.subject.expertRegional Economic Development
dc.subject.expertMicrofinance Programs
dc.subject.expertPublic Finance
dc.subject.expertLocal Financing
dc.subject.expertFinancial Stability
dc.subject.expertFinancial Sector Regulation
dc.subject.adbFinancial aid
dc.subject.adbEconomies in transition
dc.subject.adbLocal Finance
dc.subject.adbLocal Government
dc.subject.adbInsurance Companies
dc.subject.adbSocial Equity
dc.subject.naturalSocial responsibility of business
dc.subject.naturalPersonal budgets
dc.subject.naturalCost and standard of living
dc.subject.naturalBank accounts
dc.subject.naturalCredit control
dc.subject.naturalRegulatory reform
dc.subject.naturalBanks and banking
dc.title.seriesResearch Paper Series
dc.contributor.imprintAsian Development Bank
oar.adminregionEast Asia Region
oar.countryPeople's Republic of China
oar.authorShirai, Sayuri

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  • ADBI Research Paper Series
    The Asian Development Bank Institute (ADBI) research paper series disseminate selected work in progress to facilitate an exchange of ideas within academic and policy communities. An objective of the series is to circulate primary findings promptly, regardless of the degree of finish. ADBI’s activities are guided by its three strategic priority themes of inclusive and sustainable growth, regional cooperation and integration, and governance for policies and institutions.

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