Abstract:This paper investigates how government-led banking liberalization affects credit allocation by banks using as a quasi-natural experiment the establishment of city commercial banks (CCBs) in China. Based on more than three million corporate financial statements spanning over 16 years, we find that the establishment of CCBs led to a 6-14 % drop in debt funding for private firms, as well as a 1-2 % rise in their funding costs. At the same time, private infrastructure firms enjoyed a nearly 6 % increase in debt fu… Show more
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