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Does State Ownership Really Matter in Determining Access to Bank Loans? Evidence from China's Partial Privatization

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  • Dong, Yan
  • Liu, Zhentao
  • Shen, Zhe
  • Sun, Qian

Abstract

Prior studies have reported a positive relationship between state ownership and access to bank loans. Using a sample of 702,300 firm-year observations over the 1998–2007 period, we find consistent evidence that long-term debt ratios are significantly higher for firms with state ownership in the cross-section. However, once the unobservable difference across firms is controlled, the positive relationship becomes weaker. When the possible mechanical debt ratio reduction associated with the partial privatization in China is further controlled, the positive relationship between state ownership and access to bank loans completely disappears. Our findings suggest that state ownership does not necessarily lead to better access to bank loans in China, which is contrary to the common expectation.

Suggested Citation

  • Dong, Yan & Liu, Zhentao & Shen, Zhe & Sun, Qian, 2016. "Does State Ownership Really Matter in Determining Access to Bank Loans? Evidence from China's Partial Privatization," Pacific-Basin Finance Journal, Elsevier, vol. 40(PA), pages 73-85.
    • Handle: RePEc:eee:pacfin:v:40:y:2016:i:pa:p:73-85
    DOI: 10.1016/j.pacfin.2016.09.001
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    Cited by:

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    6. Yunsen Chen & Jianqiao Huang & Hang Liu & Weimin Wang, 2019. "Regional favoritism and tax avoidance: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1413-1443, March.
    7. Wu, Ming & Ohk, Kiyool & Ko, Kwangsoo, 2019. "Are cash-flow betas really bad? Evidence from the Greater Chinese stock markets," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 58-68.
    8. Liu, Sun & Zhang, Jie, 2023. "Conditional conservatism and investment efficiency under a state ownership environment: Further evidence from China," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
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    11. Oleksandr Talavera & Shuxing Yin & Mao Zhang, 2022. "Political motives of excess leverage in state-owned firms," Discussion Papers 22-04, Department of Economics, University of Birmingham.
    12. Wang, Yuyue & Fang, Hongyan & Luo, Ronghua, 2022. "Does state ownership affect rating quality? Evidence from China's corporate bond market," Economic Modelling, Elsevier, vol. 111(C).
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    15. Liu, Yu & Xu, Jian, 2022. "Residual state ownership, foreign ownership and firms' financing patterns," Emerging Markets Review, Elsevier, vol. 51(PA).

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    More about this item

    Keywords

    State ownership; Access to bank loans; Capital structure; China;
    All these keywords.

    JEL classification:

    • 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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