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Accounting conservatism, bank lending and firm investment: Evidence from a quasi-experiment of China's stimulus package

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  • Pan, Xiaofei

Abstract

Using a sample of China's listed firms between 2003 and 2014, this study finds that firms receive more bank loans after the stimulus package which is less significant for firms with conservative accounting. In addition, firms with conservative accounting exhibit higher investment efficiency, which becomes weaker after the stimulus package which represents an exogenous shock to credit supply. Further analysis shows that the abovementioned findings are more significant for non-SOEs, firms from less government-favoured industries and regions, and firms with severe interest conflicts between debtholders and shareholders. These results are robust for alternative specification and alternative measurements. Overall, these findings suggest that the beneficial effects of accounting conservatism are subject to institutional environments and government policies.

Suggested Citation

  • Pan, Xiaofei, 2017. "Accounting conservatism, bank lending and firm investment: Evidence from a quasi-experiment of China's stimulus package," Pacific-Basin Finance Journal, Elsevier, vol. 44(C), pages 64-79.
    • Handle: RePEc:eee:pacfin:v:44:y:2017:i:c:p:64-79
    DOI: 10.1016/j.pacfin.2017.06.004
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    More about this item

    Keywords

    Accounting conservatism; Bank lending; Firm investment; Stimulus package;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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