The Economic Impact of Rollover Restriction on Micro Corporations
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| Title | The Economic Impact of Rollover Restriction on Micro Corporations
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| Author | Liu Haiming and Cao Tingqiu |
| Organization | School of Finance, Shandong University of Finance and Economics;School of Economics, Shandong University |
| Email | liuhaiming_008@126.com；tqcao@126.com |
| Key Words | Liu Haiming and Cao Tingqiu |
| Abstract | Recently firms often face funding difficulties or even go bankrupt due to banks’ loans withdrawal or rollover stop, making it a focus for academics as well as supervisory agency. To solve this problem, the authorities have introduced several policies that require banks to lessen their lending standards and cut down their loans withdrawal or rollover stop. So what influence will the change of rollover standards exert on firms? This paper investigates the effect of rollover standards constraint or rollover restriction on firm performance by using 2007 regulatory change. Results show that rollover restriction has liquidity risk effect and monitoring effect. Liquidity risk effect is reflected by the results that rollover restriction makes firms cut down their loans, especially short-term loans and leads to less working capital. Monitoring effect is reflected by the results that rollover restriction make loans more likely to flow to good firms, cuts down expropriation of controlling shareholders and enhances firms’ investment efficiency. On the whole, rollover restriction has positive effect and improves firm performance. Moreover, the positive effect of rollover restriction is pronounced in small firms and non-SOE firms. Finally, rollover restriction can restrain short lending for long investment and zombie lending. Our results indicate that lessening rollover standards at will can possibly disrupt banks’ inborn monitoring capacity and reduce loans allocation efficiency, and it will do harm to structure transition and industry upgrade. |
| Serial Number | WP1250 |
| Time | 2017-12-22 |
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