Rise of Bank Competition: Evidence from Banking Deregulation in China Haoyu Gao Hong Ru Robert Townsend Xiaoguang Yang NBER Working Paper No. 25795

Issued in May 2019

NBER Program(s):Corporate Finance

Using proprietary individual level loan data, this paper explores the economic consequences of the 2009 bank entry deregulation in China. Such deregulation leads to higher screening standards, lower interest rates, and lower delinquency rates for corporate loans from entrant banks. Consequently, in deregulated cities, private firms with bank credit access increase asset investments, employment, net income, and ROA. In contrast, the performance of state-owned enterprises (SOEs) does not improve following deregulation. Deregulation also amplifies bank credit from productive private firms to inefficient SOEs due mainly to SOEs’ soft budget constraints. This adverse effect accounts for 0.31% annual GDP losses. This paper is not currently available on-line.

No more information is available.

Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w25795