%0 Journal Article
%T The impact of corruption on firms¡¯ access to bank loans: evidence from China
%A Houjian Li
%A Hua Guo
%A Peisen Liu
%J Economic Research-Ekonomska Istra£¿ivanja
%D 2020
%R https://doi.org/10.1080/1331677X.2020.1768427
%X Abstract Current theories cannot explain the coexistence of China¡¯s 40£¿years of rapid economic growth and its imperfect financial system, insufficient investor protection, and government intervention. This study empirically tests hypotheses regarding the effects of corruption on firms¡¯ access to bank loans using econometric models based on survey data of 2,848 enterprises in China collected by the World Bank. The results show an inverted U-shaped relationship between corruption and firms¡¯ access to bank loans: a low level of corruption increases firms¡¯ access to bank loans, whereas a high level of corruption hinders firms from obtaining bank loans. Mild corruption may be a suboptimal choice for firms seeking bank loans, and bank funds allocation based on corruption can achieve Pareto optimality among firms. Moreover, government guarantees are conducive to firms¡¯ access to financing and the link between corruption and firms¡¯ access to bank loans can be explained by the role of government guarantees. The improvement of institutional quality is positively associated with firms¡¯ access to bank loans and weakens the effects of corruption on firms¡¯ external financing. This study thus sheds light on the real effects of corruption and the determinants of firms¡¯ access to bank loans in developing countries
%U https://www.tandfonline.com/doi/full/10.1080/1331677X.2020.1768427