Foreign bank entry and firms’ access to bank credit: Evidence from China

This paper studies the impact of foreign bank entry on domestic firms’ access to bank credit using a within-country staggered geographic variation in the policy of foreign bank lending in China. The paper finds that after foreign bank entry profitable firms use more long-term bank loans; whereas firms with higher value of potential collateral do not. It also finds that non-state-owned firms become able to substitute some trade credit with long-term bank loans. The findings suggest that less opaque firms and non-state-owned firms benefit more from foreign bank entry and that collateral may only play a limited role in mitigating the problem of information asymmetry when creditors’ rights are not well protected in a host country.     

Cash holding,trade credit and access to short-term bank finance

Since 1988, cash holding of the UK companies has increased from 10.6% to 16.4% of total assets. To explain this increase, we develop a panel vector autoregression and analyse the dynamics between cash holding and its closest substitutes, trade credit and short-term bank finance. Impulse response functions confirm the signalling theory, as trade credit facilitates access to bank finance. Firms experiencing liquidity shocks resort to cash or trade credit but not to bank finance. Cash holding improves access to trade credit. Additional cash and trade credit trigger a slowdown of the cash conversion cycle explained by agency theory. Cash-rich firms have accumulated more cash than predicted because of an unexpected decline in short-term debt, stressing the role of banks in explaining the increase in cash holding.     

The fintech gender gap

Can fintech close the gender gap in access to financial services? Using novel survey data for 28 countries, this paper finds a large and ubiquitous ‘fintech gender gap’: while 29% of men use fintech products, only 21% of women do. This difference exceeds the gender gap in bank account ownership at traditional financial institutions. While country characteristics and individual-level controls explain about a third of the fintech gender gap, the residual gap declines by 60% when accounting for gender differences in the willingness to use new financial technology, the suitability of fintech products, and the willingness to use fintech entrants if they offer cheaper products. The paper concludes by discussing drivers of differences in attitudes and implications for policy to foster financial inclusion with new technology.     

Trade credit use and bank loan access: an agency theory perspective

In this study we find that firms’ use of trade credit significantly facilitates their access to bank loans in the future, suggesting a complementary relationship. Such a relationship is more profound for firms with higher perceived agency costs, i.e., firms with opaque corporate information, firms located in regions with less developed external institutions, and firms at an early stage of existence. Firms switch from trade credit to bank loans as the main source of debt financing as they age. However, the process is slower for firms with a greater level of corporate information opacity and firms located in regions with weak external institutions.     

Counter-cyclical substitution between trade credit and bank credit

This paper explores the substitution relationship between trade credit and bank credit, and its counter-cyclic dynamic pattern through economic cycles. We propose a new theoretical model, using a mechanism design method, which predicts the substitution between the two credits and its counter-cyclic behavior, subject to the condition of technological efficiency not less than one. This model also helps explain the somewhat contradictory evidence in the literature, on the relationship between the two credits. We present empirical evidence on the substitution effect and its counter-cyclic behavior, by using a balanced panel data set of 284 listed Chinese companies for the period 1998-2006. We further find that the substitution behaves counter-cyclically with respect to the coincident macroeconomic indicator, namely, GDP. Our empirical analysis also has some new features such as treating endogeneity carefully and incorporating the lag-effect of trade credit coherently.     

Asymmetric benchmarking in bank credit rating

This study proposes an information asymmetry hypothesis to examine why bank credit ratings vary among countries even when bank financial ratios remain constant. Countries are divided among those with low and high information asymmetry. The former include high-income countries, those in North America and West Europe regions, and those with strong institutional environment quality, whereas the latter group possess the opposite characteristics. This study hypothesizes that the influences of financial ratios on ratings are enhanced in low information asymmetry countries but reduced in countries with high information asymmetry. The sample includes the long-term credit ratings issued by Standard and Poor's from 86 countries during 2002-2008. The estimated results show that the effects of financial ratios on ratings are significantly affected by information asymmetries. Countries wishing to improve the credit ratings of their banks thus should reduce information asymmetry.     

The direct and indirect impact of bank privatization and foreign entry on access to credit in Argentina’s provinces

Privatization and increased foreign ownership transformed the Argentine banking sector during the 1990s. While both improved sector efficiency, there was concern that they might reduce access to credit outside of Buenos Aires. The results in this paper suggest that these fears were exaggerated. Provinces that privatized their banks suffered only temporary reductions in credit associated with cleaning the portfolio of the privatized banks. Typically, growth in lending by the privatized entity and by other banks restored credit to pre-privatization levels within a few years. In addition, increased foreign ownership coincided with more, not less, lending outside of Buenos Aires.     

Green credit policy and corporate access to bank loans in China: The role of environmental disclosure and green innovation

This research assesses the effectiveness of China's green credit policy. We explore whether firms with better external environmental disclosure and internal green innovation receive more bank loans because of green credit, and utilize a panel of 1086 listed Chinese manufacturing enterprises from 2012 to 2017 to test our hypotheses. The results suggest that firms with higher environmental disclosure quality do not obtain more loans, and only green innovation promotes access to corporate loans. We show that the underlying cause of this phenomenon is corporate green-washing, which is prevalent in soft environmental disclosure and hinders enterprises from obtaining more loans. Our findings contribute to the literature on green credit policy, corporate green innovation, environmental disclosure, and green-washing, and provide a reference for companies, banks, and governments to make decisions.     

US partisan conflict uncertainty and households' access to bank credit: Evidence from UK survey data

This paper explores how US political uncertainty, stemming from partisan conflict, affects UK households' access to bank credit. Using data from a unique UK survey database and the US news-based Partisan Conflict Index developed by Azzimonti (2018), the findings document that US partisan policy uncertainty negatively affects UK households' access to loans and credit cards. Banks' increased caution on deal selection also appears to be an underlying channel through which partisan political uncertainty can affect lending activities. Further evidence suggests that this partisan uncertainty also increases loan interest rates.     

State dependence in access to credit

This paper investigates whether firms’ access to credit is characterized by state dependence. We introduce a first-order Markov model of credit restriction with sample selection that makes it possible to identify state dependence in presence of unobserved heterogeneity. The results, based on a representative sample of Italian firms, show that state dependence in access to credit is a statistically and economically significant phenomenon and that this is more prominent among medium-large firms.     

Credit derivatives and bank credit supply

Credit derivatives are the latest in a series of innovations that have had a significant impact on credit markets. Using a micro data set of individual corporate loans, this paper explores whether use of credit derivatives is associated with an increase in bank credit supply. We find only limited evidence that greater use of credit derivatives is associated with greater supply of bank credit. The strongest effect is for large term loans—newly negotiated loan extensions to large corporate borrowers, with a largely negative impact on (previously negotiated) commitment lending. Even for large term borrowers, increases in the volume of credit are offset by higher spreads. These findings suggest that the benefits of the growth of credit derivatives may be narrow, accruing mainly to large firms that are likely to be “named credits” in these transactions. Finally, use of credit derivatives appears to be complementary to other forms of hedging by banks, though the banks most active in hedging appear to charge more for additional amounts of credit.     

Spillover effects of government initiatives fostering entrepreneurship on the access to bank credit for entrepreneurial firms in Europe

We explore the role of government initiatives fostering entrepreneurship—in the form of tax advantages and government support—in influencing the probability that entrepreneurial firms obtain bank credit and are not discouraged from applying for a loan. We propose that government initiatives fostering entrepreneurship should allow entrepreneurial firms to access more bank credit by reducing the risk incurred by lenders. We simultaneously estimate the probability of obtaining credit when a firm applies for a loan and the probability that the firm has been discouraged when it does not apply for a loan. In both cases we control for endogeneity. Our results are based on 18,872 observations (from the European Central Bank (ECB) SAFE dataset and Global Entrepreneurship Monitor – GEM) and show that government initiatives improve the probability of entrepreneurial firms obtaining bank credit but do not affect the probability of being discouraged from borrowing. The results also suggest that government initiatives fostering entrepreneurship are of most benefit to younger, smaller, high-growth, and more innovative firms that operate in contexts where the demand for, and accordingly the competition for, bank credit is strongest.     

论农业发展银行转轨时期的信贷管理——谈农业发展银行改革与发展中应处理好的十大关系

本文对粮棉油流通体制市场化改革进程中的信贷管理进行了深入探讨,认为要重视并处理好十大关系.     

Trade credit and bank credit: Evidence from recent financial crises

This paper studies the effect of financial crises on trade credit for a sample of 890 firms in six emerging economies. Although the provision of trade credit increases right after a crisis, it contracts in the following months and years. Firms that are financially more vulnerable to crises extend less trade credit to their customers. We argue that the decline in aggregate trade credit ratios is driven by the reduction in the supply of trade credit that follows a bank credit crunch, consistent with the “redistribution view” of trade credit provision, whereby bank credit is redistributed via trade credit from financially stronger firms to weaker firms.     

法国中央银行信用评级体系的现实意义

本次金融危机暴露了现有国际评级体系的诸多缺点,为此,各国纷纷减少对三大国际信用评级机构的依赖,考虑逐步建立自己的评级体系。其中,法国中央银行信用评级体系以其悠久历史、26万家国内非金融企业的覆盖面、评级结果的客观有效而广受关注。文章考察了该评级体系的发展经验,比较了其与国际评级体系的差异,并介绍了其独特的基于专家评估的分析方法,以期为我国评级体系建设提供借鉴。     

现金流量表在银行信贷决策中的运用

通过对现金流量表的分析．能正确评价企业当期及以前各期取得的翻润质量。科学预测企业未来的财务状况．从而有利于商业银行信贷员作出正确的信贷决策。     

The impact of bank consolidation on small business credit availability

This paper examines how banking consolidation has affected small businesses credit. Using the Survey of Small Business Finances, the empirical model examines how credit supply to small firms responds to larger banks, and whether the non-bank supply of credit has offset decreases in credit from banks. Using an empirical model to correct for sample selection, large banks are found to lower the probability of obtaining credit for small businesses, and this lower probability is not offset by increased total loans. Non-bank institutions are found to make up much, but not all, of the decrease.     

Firms' access to informal financing: The role of shared managers in trade credit access

We investigate how shared managers and directors (shared M&Ds) with major suppliers affect a firm's access to trade credit. Using a sample of listed firms in China, we find that shared M&Ds play an important role in helping firms obtain trade credit. This favorable effect is strengthened for firms with higher information asymmetry, located in regions with lower social trust, operating in more innovative and heterogeneous industries, and experiencing greater financial constraints. Our findings support the proposition that shared M&Ds can reduce information asymmetry and build mutual trust between firms and their suppliers. This study contributes to the literature on the benefits of social connections within supply chain relationships and the literature on the economic consequences of interlocked managers and directors.     

Stochastic reserve losses and bank credit expansion

This paper addresses the issue of bank credit expansion when reserve and deposit flows are stochastic. For a risk-neutral bank able to lend and borrow at fixed interest rates, and incurring a lump sum transaction cost when short of reserves, it is found that if deposit flows are normally distributed — essentially the Orr-Mellon model — the distribution of new reserves among banks does not affect credit expansion. An explanation for this counter-intuitive result is given by establishing a parallel between the model and the literature on portfolio theory. The implications for credit expansion of more general assumptions is discussed.     

Coinsurance effect and bank lines of credit

The coinsurance effect hypothesis predicts that firm diversification reduces financial constraints through imperfectly correlated cash flows among segments. We empirically test the hypothesis by studying the relation between coinsurance effect and bank lines of credit. We find that coinsurance effect is associated with a higher availability of bank lines of credit, and that diversified firms hold a higher level of bank lines of credit if they have higher investment opportunities and if they are bank-dependent. We find that diversified firms hold a higher fraction of corporate liquidity in the form of bank lines of credit due to the coinsurance effect. The findings are consistent with the coinsurance effect hypothesis and contribute to the debate on the value consequence of firm diversification by disclosing a specific channel through which firm diversification affects financial constraints.