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Provincial official turnover and bank loans

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  • Cao, Chunfang
  • Dong, Yizhe
  • Hou, Wenxuan
  • Liu, Yue
  • Qian, Xianhang

Abstract

Based on the turnover data of provincial party committee secretaries in China between 2000 and 2008, we find that the loan increment of local SOEs (state-owned enterprises) decreases by 18.9% in turnover years. We also document increased efficiency of long-term loans in turnover years. The effects of provincial leader turnover on bank loans only exist for local SOEs in eastern regions and more marketized provinces. Local officials have less of a political incentive to exert influence on bank credit allocation in turnover years, and therefore banks act as more effective intermediaries in optimizing credit allocation and improving the efficiency of loans.

Suggested Citation

  • Cao, Chunfang & Dong, Yizhe & Hou, Wenxuan & Liu, Yue & Qian, Xianhang, 2019. "Provincial official turnover and bank loans," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x19300496
    DOI: 10.1016/j.pacfin.2019.101202
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    More about this item

    Keywords

    Political turnover; Bank loans; Credit allocation efficiency; Local SOEs;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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