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To what extent did the economic stimulus package influence bank lending and corporate investment decisions? Evidence from China

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  • Liu, Qigui
  • Pan, Xiaofei
  • Tian, Gary Gang

Abstract

Using a panel of Chinese firms over the period 2003–2013, we show that, from the supply-side perspective, as a result of the implementation of the economic stimulus package in China, state-owned enterprises (SOEs) received more bank loans and invested more than non-SOEs. We further find that after the implementation of the economic stimulus package, bank lending became less responsive to firm profitability, and firm investments became less responsive to investment opportunities for SOEs, non-SOEs from favoured industries and regions, and non-SOEs with political connections. Overall, our findings support the view that the stimulus package and the associated increase in bank loan supply in China resulted in more resources being allocated to SOEs.

Suggested Citation

  • Liu, Qigui & Pan, Xiaofei & Tian, Gary Gang, 2018. "To what extent did the economic stimulus package influence bank lending and corporate investment decisions? Evidence from China," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 177-193.
    • Handle: RePEc:eee:jbfina:v:86:y:2018:i:c:p:177-193
    DOI: 10.1016/j.jbankfin.2016.04.022
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    More about this item

    Keywords

    Economic stimulus package; Bank loan supply; Bank lending; Investment decisions; SOEs;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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