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Disguised corruption: Evidence from consumer credit in China

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  • Agarwal, Sumit
  • Qian, Wenlan
  • Seru, Amit
  • Zhang, Jian

Abstract

Using a comprehensive sample of credit card data from a leading Chinese bank, we show that government bureaucrats receive 16% higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher likelihood of delinquency and debt forgiveness. Regions associated with greater credit provision to bureaucrats open more branches and receive more deposits from the local government. After staggered corruption crackdowns of provincial-level political officials, the new credit cards originated to bureaucrats in exposed regions do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are similar to those of non-bureaucrats.

Suggested Citation

  • Agarwal, Sumit & Qian, Wenlan & Seru, Amit & Zhang, Jian, 2020. "Disguised corruption: Evidence from consumer credit in China," Journal of Financial Economics, Elsevier, vol. 137(2), pages 430-450.
    • Handle: RePEc:eee:jfinec:v:137:y:2020:i:2:p:430-450
    DOI: 10.1016/j.jfineco.2020.03.002
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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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