Formal Finance and Trade Credit during China's Transition

Using a large panel dataset of Chinese industrial firms, we find that poorly performing SOEs were more likely to redistribute credit to firms with less privileged access to loans via trade credit. While that could be consistent with the efficient redistribution of credit, it is more likely that thes...

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Main Authors:	Cull, Robert, Xu, Lixin Colin, Zhu, Tian
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Socialist Enterprises and Their Transitions P310 Socialist Institutions and Their Transitions: Financial Economics P340
Online Access:	http://hdl.handle.net/10986/5560

id	okr-10986-5560
recordtype	oai_dc
spelling	okr-10986-55602021-04-23T14:02:22Z Formal Finance and Trade Credit during China's Transition Cull, Robert Xu, Lixin Colin Zhu, Tian Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Socialist Enterprises and Their Transitions P310 Socialist Institutions and Their Transitions: Financial Economics P340 Using a large panel dataset of Chinese industrial firms, we find that poorly performing SOEs were more likely to redistribute credit to firms with less privileged access to loans via trade credit. While that could be consistent with the efficient redistribution of credit, it is more likely that these SOEs extended trade credit to prop up faltering customers that were in arrears. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these firms' customers that were shut out of formal credit markets. As biases in lending become less severe, the allocation of lending became more efficient, and the amount of trade credit extended by private firms declined. Our evidence implies that redistribution of bank loans via trade was not a major contributor to China's explosive growth. 2012-03-30T07:33:25Z 2012-03-30T07:33:25Z 2009 Journal Article Journal of Financial Intermediation 10429573 http://hdl.handle.net/10986/5560 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article China
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Socialist Enterprises and Their Transitions P310 Socialist Institutions and Their Transitions: Financial Economics P340
spellingShingle	Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Economic Development: Financial Markets Saving and Capital Investment Corporate Finance and Governance O160 Socialist Enterprises and Their Transitions P310 Socialist Institutions and Their Transitions: Financial Economics P340 Cull, Robert Xu, Lixin Colin Zhu, Tian Formal Finance and Trade Credit during China's Transition
geographic_facet	China
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Using a large panel dataset of Chinese industrial firms, we find that poorly performing SOEs were more likely to redistribute credit to firms with less privileged access to loans via trade credit. While that could be consistent with the efficient redistribution of credit, it is more likely that these SOEs extended trade credit to prop up faltering customers that were in arrears. By contrast, profitable private domestic firms were more likely to extend trade credit than unprofitable ones. Trade credit likely provided a substitute for loans for these firms' customers that were shut out of formal credit markets. As biases in lending become less severe, the allocation of lending became more efficient, and the amount of trade credit extended by private firms declined. Our evidence implies that redistribution of bank loans via trade was not a major contributor to China's explosive growth.
format	Journal Article
author	Cull, Robert Xu, Lixin Colin Zhu, Tian
author_facet	Cull, Robert Xu, Lixin Colin Zhu, Tian
author_sort	Cull, Robert
title	Formal Finance and Trade Credit during China's Transition
title_short	Formal Finance and Trade Credit during China's Transition
title_full	Formal Finance and Trade Credit during China's Transition
title_fullStr	Formal Finance and Trade Credit during China's Transition
title_full_unstemmed	Formal Finance and Trade Credit during China's Transition
title_sort	formal finance and trade credit during china's transition
publishDate	2012
url	http://hdl.handle.net/10986/5560
_version_	1764395484358639616

Formal Finance and Trade Credit during China's Transition

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