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The Effects of Bank Loans and Bank Ownership Structure on Corporate Investment Efficiency in China

【Authors】
LIU Guanchun, ZHANG Jun, YE Yongwei
【WorkUnit】
LIU Guanchun (Sun Yat-sen University, 510275)ZHANG Jun (Fudan University, 200433)YE Yongwei (Shanghai University of Finance and Economics, 200433)
【Abstract】

Using the hand-collected data on bank loans in China, this paper examines whether bank loans and bank ownership structure affect corporate investment efficiency. The results show that there is a significant negative relationship between bank loans and corporate investment efficiency, which is manifested in the aggravation of overinvestment and underinvestment, especially when the loans are from state-owned banks, and the negative effect on investment efficiency is more pronounced for firms with weaker governance capacity. Further, the mechanism test shows that creditor supervision intensity of firms is negatively related to loans provided by state-owned banks, but not to loans provided by non-state-owned banks. In particular, as the loan cost and debt maturity are associated with bank loans and bank ownership structure, we exclude these alternative explanations. Overall, our findings argue that bank loans and bank ownership structure do not play an active external governance role, so it is of great significance to deepen market-oriented structural reform of the banking sector.


JEL:G31, J24, O12

【KeyWords】
Bank Loans, Ownership Structure, Investment Efficiency, External Governance Effect