Venture capital certification of small and medium‐sized enterprises towards banks: evidence from China

Abstract

Through a proprietary dataset of small and medium-sized enterprises (SMEs) on China's National Equities Exchange and Quotations (NEEQ), we examine the impact of venture capital (VC) backup on access to bank loans by SMEs. We find that VC backup can help SMEs obtain more bank loans under better conditions and significantly relieve their financing constraint. This is especially meaningful for private SMEs, those in hightech, in regions of less-developed banking industry, or with lower quality accounting information. This study may have policy implications as a pilot 'combined debt-equity financing' discussion in the context of the largest bank-based economy.

The impact of supply chain finance on firm cash holdings: Evidence from China

“…On the other, banks may infiltrate more borrowers through accurate information from the core firm in SCF ( Caridi et al, 2010 ; Hofmann, 2014 ). Under noticeable information asymmetry, banks in China are often reluctant to lend to private firms or SMEs ( Wu and Xu, 2020 ; Li et al, 2020a ). Innovative financial solutions within the core firm may also contribute to increased commission fees for the banks besides better risk management of loans to the supply chain.…”

“…Given the slowing market and increased competition among Chinese firms in recent years ( He et al, 2019 ; Wu and Xu, 2020 ), SCF may need to better enhance the competitiveness of firms within the supply chain ( Wuttke et al, 2013b ; Wuttke et al, 2019 ). Existing studies often suggest that cash holdings often inevitably impact on a firm's competitiveness in the marketplace.…”

“…Often with better access to bank loans and enjoying more commercial credit, a core firm in SCF can share its financial resources with other firms in the supply chain or provide guarantees to facilitate small and medium-sized enterprises (SMEs) to borrow bank loans. Given the outstanding lending preference towards state-owned enterprises (SOEs) ( Xu and Lin, 2007 ; Fu et al, 2015 ; Xu et al, 2015 ), and the traditional bias against either SMEs or those of private ownership ( Allen et al, 2005 ; He et al, 2019 ; Li et al, 2020a ; Li et al, 2020b ; Wu and Xu, 2020 ), SCF has been growing rapidly in the largest bank-based economy ( Lin and Zhang, 2020 ; Song et al, 2020 ).…”

Does access to credit reduce SMEs’ tax avoidance? Evidence from a regression discontinuity design

“…First, we study how access to finance affects firms' tax avoidance considering that TRRRCs improve loan availability for SMEs. Second, considering the tradeoff between financial information availability and firm size, our sample covers all firms listed on the National Equities Exchange and Quotations, which is suitable for studying the financing problems of SMEs (Wu and Xu 2020). In addition, we use the RDD method, which is currently widely used in corporate finance research to identify causality (e.g., Chava and Roberts 2008;Bradley et al 2016;Cai et al 2018;Chemmanur and Tian 2018;Zhang 2019).…”

The influence of social media on female entrepreneurs: a Prisma compliant exploration

“…At the same time, Chinese laws impose strict restrictions on capital outflows, which is why most of the resources The banking sector is located domestically. The cost of loans for innovative enterprises remains low, therefore this source is more preferable for them than operations with securities (Wu, Xu, 2020). In Spain, a specially created network of specialized state credit institutions represented by the Mortgage Bank, Stroybank, Industrial Bank, Local Credit Bank, Foreign Economic Bank and Central Bank, along with private commercial banks, covers the entire needs of the real sector in the priority areas of navigation and fishing (Shchenin, 2010).…”