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The Implications of Faster Lending: Loan Processing Time and Corporate Cash Holdings

Author

Listed:
  • Vesa Pursiainen

    (University of St. Gallen; Swiss Finance Institute)

  • Hanwen Sun

    (University of Bath, School of Management)

  • Qiong Wang

    (Southeast University)

  • Guochao Yang

    (School of Accounting, Zhongnan University of Economics and Law; IIDPF, Zhongnan University of Economics and Law)

Abstract

A unique natural experiment in China – the city-level staggered introduction of administrative approval centers (AAC) – reduces bank loan processing times by substantially speeding up the process of registering collateral without affecting credit decisions. Following the establishment of an AAC, firms significantly reduce their cash holdings. State-owned enterprises are less affected. Cash flow sensitivity of cash holdings decreases, as does the cash flow sensitivity of investment. The share of short-term debt increases, while inventory holdings and reliance on trade credit decrease. Defaults also decrease. These results suggest that timely access to credit has important implications on firms' financial management.

Suggested Citation

  • Vesa Pursiainen & Hanwen Sun & Qiong Wang & Guochao Yang, 2025. "The Implications of Faster Lending: Loan Processing Time and Corporate Cash Holdings," Swiss Finance Institute Research Paper Series 25-17, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2517
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    More about this item

    Keywords

    banking; efficiency; precautionary cash holdings; capital management; corporate loans;
    All these keywords.

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • 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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