Capital Inflows and Corporate Credit Growth: Demand Booms or Supply Expansions
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| Title | Capital Inflows and Corporate Credit Growth: Demand Booms or Supply Expansions
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| Author | Tan Zhibo |
| Organization | School of Economics, Fudan University |
| Email | tzb0905@pku.edu.cn; |
| Key Words | Capital Inflows; Credit Growth; Credit Booms; Banking Sector Characteristics; Analysis of Demand and Supply |
| Abstract | With the simultaneous use of cross-country macro-level and firm-level data, this paper investigates the associations of different types of capital inflows with corporate credit growth and credit booms, and explores its underlying mechanisms. Empirical analysis at the country level shows that the composition of capital inflows matters: only non-FDI capital inflows boost the corporate credit growth and bring about credit booms. Explorations at the firm level further corroborate above findings: non-FDI capital inflows increase the credit growth of firms that rely more on external financing. Further examinations of the transmission channels by inspecting changes in stock market capitalization and the role of banking sector characteristics in such linkages demonstrate that supply expansions rather than demand bonanzas contribute more to above connections. To our knowledge, the paper is the first one to focus on the impacts of different kinds of capital inflows on corporate credit growth and compare the demand side channel and supply side channel at the same time. It has rich policy implications for the prevention of credit booms and financial crisis. |
| Serial Number | WP721 |
| Time | 2014-09-30 |
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