Biased Lending and Non-performing Loans in China's Banking Sector

Ding, Lei; Thangavelu, Shandre M.; Hu, Qing

doi:10.1080/00220380500155361

Cited by 74 publications

(38 citation statements)

References 12 publications

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“…The results of this study show that the Chinese banks have a structured lending bias towards state-owned enterprises (SOE), especially those with high default risk. The study observes that the high-risk SOE were able to borrow more than the low-risk SOEs and non-SOEs (Lu et al, 2005).…”

Section: Literature Reviewmentioning

confidence: 84%

“…The impact on loan categories is obvious with mortgages being the least reactive to changes in the macroeconomic environment. Lu et al (2005) explored the relationship between banks' lending behaviour and NPLs by using the financial data from annual financial reports of all publicly listed companies. The results of this study show that the Chinese banks have a structured lending bias towards state-owned enterprises (SOE), especially those with high default risk.…”

Section: Literature Reviewmentioning

confidence: 99%

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Examining of Determinants of Non-Performing Loans

Radivojević¹,

Jovovic²

2017

Prague Economic Papers

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In this paper the authors examine the determinants of NPL ratio using a cross-county analysis from the sample of 25 emerging countries. Using the panel data approach, determinants of NPL are analysed for the period from 2000 to 2011. The main aim of this paper is to draw a relevant econometric model, to demonstrate the impact of independent variables on the dependent variable by using static and dynamic model estimation techniques. The results show that NPLs rate can be mainly explained by crucial macroeconomic factors, such as the GDP and inflation rate, and bank-specific factors, such as ROA, CAP and lagged NPLs rate.

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Section: Literature Reviewmentioning

confidence: 84%

Section: Literature Reviewmentioning

confidence: 99%

Examining of Determinants of Non-Performing Loans

Radivojević¹,

Jovovic²

2017

Prague Economic Papers

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“…Some of the studies which analyze NPLs of Chinese banks from different perspectives are given below. Lu et al (2007) explored the relationship between Chinese banks' lending behavior and level of NPLs. They used the data from a set of publically listed companies and concluded that state-owned enterprises (SOEs) got more loans compared with other firms.…”

Section: Studies Regarding Non-performing Loansmentioning

confidence: 99%

Non-performing loans (NPLs), liquidity creation, and moral hazard: Case of Chinese banks

Umar

Sun

2016

China Financ. and Econ. Rev.

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Background: This study analyzes the impact of non-performing loans (NPLs) on bank liquidity creation to investigate the existence of moral hazard problem in Chinese banks. Methods: It uses data from 197 listed and unlisted Chinese banks, spanning the period 2005 to 2014. Generalized method of moments (GMM) estimation, fixed and random effect model, and pool data techniques have been used for analysis. Results: Total liquidity creation by Chinese banks is declining, and NPLs ratio has started to increase following a continuous decline between 2005 and 2012. We find that liquidity creation by Chinese banks does not depend on NPLs ratio. We repeated the analysis for small and large banks and the results of these subsamples reinforced our findings for the aggregate sample. Conclusions: We did not find the evidence of moral hazard problem in Chinese banks.

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“…Even if creditors have the incentive to discipline managers of the debtor company, the incomplete legal protection of creditor rights can make it costly for them to enforce discipline (Dharwadkar et al, 2000). Further, in countries like China, all the major banks are owned by the state, and therefore have their own governance problems (Lu, Thangavelu, & Hu, 2005). They cannot be used as an effective monitoring mechanism and will not likely call for divestiture activity in debtor companies.…”

Section: Divestiture and Corporate Debtmentioning

confidence: 98%