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

Qigui Liu, Xiaofei Pan, Gary Gang Tian*

*Corresponding author for this work

Research output: Contribution to journalArticle

23 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)177-193
Number of pages17
JournalJournal of Banking and Finance
Volume86
DOIs
Publication statusPublished - Jan 2018

Keywords

  • Bank lending
  • Bank loan supply
  • Economic stimulus package
  • Investment decisions
  • SOEs

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