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Who received interest-free loans during the COVID-19 pandemic?

Author

Listed:
  • Yang, Liuyong
  • Li, Kainan
  • Wu, Peng

Abstract

During the COVID-19 pandemic, the Chinese government implemented a series of policies to encourage banks to provide interest-free loans (IFLs) to small businesses. Using a unique dataset, we find that firms with closer relationships with their banks are more likely to obtain IFLs, particularly in areas with greater banking competition. Our results suggest that banks engage in this behavior to gain a competitive advantage in the local credit market.

Suggested Citation

  • Yang, Liuyong & Li, Kainan & Wu, Peng, 2023. "Who received interest-free loans during the COVID-19 pandemic?," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006852
    DOI: 10.1016/j.frl.2023.104313
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    References listed on IDEAS

    as
    1. Patrick Bolton & Xavier Freixas & Leonardo Gambacorta & Paolo Emilio Mistrulli, 2016. "Relationship and Transaction Lending in a Crisis," The Review of Financial Studies, Society for Financial Studies, vol. 29(10), pages 2643-2676.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Small and medium-sized enterprises; Interest-free loans; Relationship lending; Bank competition; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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