Biased Lending and Non-performing Loans in China's Banking Sector
This article uses a panel data set of public listing companies in China empirically to explore the relationship between banks' lending behaviour and non-performing loans. Our results show that state-owned enterprises (SOEs) got more loans than other firms, other things being equal, and SOEs with high default risks were able to borrow more than the low-risk SOEs and non-SOEs. This suggests that Chinese banks had a systemic lending bias in favour of SOEs, particularly those with high default risks, during the period under investigation. The causes and implications of this behaviour are discussed.
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Volume (Year): 41 (2005)
Issue (Month): 6 ()
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