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Geographical Structure of Finance, Bank Competition, and Business Environment: Empirical Evidence from Branches of Commercial Banks and Blacklisted Firms

【Authors】
DAI Meihong
【WorkUnit】
Dongbei University of Finance and Economics, 116025.)
【Abstract】

As China works to construct the new development paradigm, it pays growing attention to improving the business environment, for which building a sound social credit system is vital. But few papers investigate the bank competition's impact on social credit from the perspective of geographical structure of finance. Therefore, this paper focuses on businesses with a poor credit score at the micro level. First, it explains theoretically the impact of bank competition on firms' credit. Second, it demonstrates the theoretical hypothesis empirically based on micro-data from China during 2001-2013: bank competition helps decrease the probability of firms turning to defaulter, and improve their credit instead by easing the credit constraints on the firms. The research conclusion holds after altering the measurement of key variables and addressing the endogeneity issue. Moreover, results of heterogeneous analysis indicate that the positive impact of bank competition on corporate credit is more significant for large firms and private firms. Results of extensive analysis indicate that informal institutions, such as Confucius culture, also help improve corporate credit; bank competition helps improve commercial credit and firms' capacity of financial liabilities. This paper provides micro-level evidence for the financial supply-side structural reform, offers new insights for building a better social credit system and business environment. 


JEL:G20, D22, R38

【KeyWords】
Geographical Structure of Finance, Bank Competition, Social Credit, Firm, Business Environment