Local Government’s Fiscal Pressure and Bank Credit Resource Allocation Efficiency
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| Title | Local Government’s Fiscal Pressure and Bank Credit Resource Allocation Efficiency
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| Author | Zhu Jigao,Yue Heng and Rao Pingui |
| Organization | University of International Business and Economics; Peking University;JiNan University |
| Email | zhujigao@gmail.com；yueheng@gsm.pku.edu.cn；traopingui@jnu.edu.cn |
| Key Words | Local government; Fiscal pressure; City commercial bank; Bank credit resource allocation |
| Abstract | Using the data of Chinese city commercial banks from 2005 to 2012, the paper analyzes how local government’s fiscal pressure influences commercial banks’ credit resource allocation. We find that when local government’s fiscal pressure increases, local city commercial banks will allocate more credit resource to local state-owned economic sectors, which has a negative impact on bank’s performance including higher non-performing loan and worse accounting performance. Further evidence shows that, the allowance ratio for loan losses is lower for banks with more credit resource allocated to local state-owned economic sectors and higher non-performing loan ratio when banks are located in province with higher government’s fiscal pressure. This finding indicates that banks will use the allowance for loan losses as an earnings management tool to deal with regulation pressure. The paper explicitly analyzes the channel through which local government influences bank’s credit resource allocation and contributes to the literature of Chinese commercial bank in transition period. Our findings also have important policy implications for city commercial bank regulation. |
| Serial Number | WP749 |
| Time | 2014-11-04 |
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