IDEAS home Printed from https://ideas.repec.org/a/eee/ecosys/v48y2024i3s0939362524000608.html
   My bibliography  Save this article

How does local government debt affect bank loan pricing? Evidence from loan-level data

Author

Listed:
  • Chen, Wen

Abstract

Existing research focuses on the crowding out effect of local government debt on the quantity of corporate bank loans, but hardly explores the impact of local government debt on bank loan prices. This paper empirically finds that a rise in local government debt increases bank loan prices, based on the loan-level data of Chinese listed companies from 2011 to 2018. This result is robust to a battery of sensitivity tests. Besides, local government debt is found to affect the costs of unsecured loans and short-term loans more strongly. Hence, in response to the expansion of local government debt, enterprises may replace transaction loans with relationship loans to control financing costs. The mechanism tests show that local government debt increases loan prices by increasing both financial constraints and environmental uncertainty. The paper provides new insights into the impact of local government debt on corporate financing.

Suggested Citation

  • Chen, Wen, 2024. "How does local government debt affect bank loan pricing? Evidence from loan-level data," Economic Systems, Elsevier, vol. 48(3).
    • Handle: RePEc:eee:ecosys:v:48:y:2024:i:3:s0939362524000608
    DOI: 10.1016/j.ecosys.2024.101238
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0939362524000608
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecosys.2024.101238?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Geng, Xin & Qian, Meijun, 2024. "Understanding the local government debt in China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).

    More about this item

    Keywords

    Local government debt; Loan price; Environmental uncertainty;
    All these keywords.

    JEL classification:

    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecosys:v:48:y:2024:i:3:s0939362524000608. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://edirc.repec.org/data/osteide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.