Bank versus nonbank financial institution lending behaviour: indictors of firm size, risk or ownership?

ABSTRACT

Using 1251 matched commercial loan deal terms of listed companies over the period 2003–2014, we examine the heterogeneity of lending behaviours of bank and nonbank financial institutions. The results show that large firms have a higher likelihood of getting loans from nonbank financial institutions. Compared to banks, nonbank financial institutions are more likely to provide credit help to high operation risk firms. State-owned listed firms have a higher probability to get finance from nonbank financial institutions than private firms, which highlights the situation that private firms are in a weak position to get credit help from China’s financial system. Moreover, the process of increasing the banks’ noninterest income ratio tends to drives firms to borrow from nonbank financial institutions.

KEYWORDS:

• Bank
• nonbank financial institutions
• lending behaviour
• firm characteristics

JEL CLASSIFICATION:

• G02
• G21
• G29

Acknowledgements

This work was supported by the National Natural Science Foundation of China (71273048) the open project of Jiangsu key laboratory of financial engineering (Nanjing Audit University) [NSK2015-18].

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Policy banks and the China development bank group include China Development Bank (CDB), the Export-Import Bank of China (EIBC), and Agricultural Development Bank of China (ADBC). They are mainly responsible for state-invested projects for developing areas, trade development projects, and state-invested agricultural projects. These lending deals are not commercial loans.

² In our sample, non-bank financial institutions include trust companies, investment companies, assets management companies and credit cooperatives.

³ The Chinese government made a four trillion RMB stimulus package plan as its biggest reaction to stimulate the economy against the global financial crisis, which resulted in fast growth in the lending market.

⁴ The test results are available upon request.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71273048]; the open project of Jiangsu key laboratory of financial engineering (Nanjing Audit University) [NSK2015-18].