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The “heterogeneous” effect of government grants on bank lending

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  • Shuibin Gu
  • Qinyue Zhang

Abstract

This study aims to test whether banks can recognize different signals from different types of government grants received by their clients and respond differently. Using a novel panel data set from China, we construct a three-way fixed-effect regression model and empirically explore the effect of government grants received by banks’ clients on banks’ lending decisions. We find that banks have heterogeneous attitudes towards their clients when the clients receive different types of government grants. In particular, we discover that banks behave positively toward clients who receive "development supportive" grants but negatively toward clients who receive "helping hand" grants. The main results hold after a series of robustness tests. Our study offers fresh perceptions on how banks see government grants of their clients while making lending choices. Our finds will offer certain inspirations for government grant policies and bank lending decisions.

Suggested Citation

  • Shuibin Gu & Qinyue Zhang, 2023. "The “heterogeneous” effect of government grants on bank lending," PLOS ONE, Public Library of Science, vol. 18(12), pages 1-19, December.
    • Handle: RePEc:plo:pone00:0289375
    DOI: 10.1371/journal.pone.0289375
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    References listed on IDEAS

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    Cited by:

    1. Yuran Chen & Qian Huang & Qiaoyun Zhang, 2024. "The impact of digital inclusive financial development on local government expenditure: Evidence from China," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-23, May.

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