Bribery, rather than firm performance, largely determines the extent to which private firms access bank credit in China. Bribery enables an economic outcome whereby firms with better economic performance are awarded larger loans. These firms also pay more in terms of bribes. Although satisfactory firm performance does determine whether firms can access loans, it does so only for loans originated by the big-four banks. For loans originated by smaller banks, performance is not essential for firms to secure loan access. Our evidence sheds light on the surprising finding of earlier studies that Chinese banks use commercial logic in their lending practices despite being endowed with a weak institutional framework.

We examine how management stock options affect corporate risk taking. We exploit exogenous variation in stock option grants generated by FAS 123R and use loan spreads to infer risk taking. Using a difference-in-differences approach, we find that the spreads of loans taken by firms that did not expense options before FAS 123R (treated firms) significantly decrease after FAS 123R relative to firms that either did not issue stock options or voluntarily expensed stock options before 123R (control firms). We also find that the effect is stronger for firms with high agency conflicts associated with risk-shifting. Furthermore, loans taken by the treated firms are less likely to contain collateral requirements and are less likely to have covenants restricting capital investment post FAS 123R.

This paper examines the dynamics of administered interest rate changes in response to changes in the benchmark money market rate in Singapore. Our results show that the administered rates’ adjustment speed differs across both financial institutions and financial products. The financial institutions’ administered (lending and deposit) rates, moreover, are more rigid when they are below their equilibrium level than when they are above. Our finding, hence, implies that the speed of monetary transmission is not uniform across all sectors of the economy and that a tightening monetary policy takes a longer time to impact the economy than an expansionary monetary policy.

Investment-financing maturity mismatches are common among firms worldwide, yet little is known about how government interventions can tackle them. This paper investigates China's Industry-Finance Cooperation Pilot Program as a quasi-natural experiment to examine whether, to what extent, and through what mechanisms government policies can address maturity mismatches. Using a multi-period difference-in-differences (DID) model and a sample of publicly listed A-share firms in China from 2014 to 2022, we find that the pilot program significantly reduces maturity mismatches by improving bank-firm information flows, reducing banks' concerns over moral hazard, and narrowing the term spread between short- and long-term interest rates. These findings provide empirical evidence that government policies can simultaneously tackle both supply and demand causes of maturity mismatches. Cross-sectional analyses reveal that the mismatch alleviation effect is strongest among non-state-owned enterprises, firms with low collateral availability, financially constrained firms, and those in highly competitive industries. Further, we find that alleviating maturity mismatches enhances firm stability, lowers financial distress, and improves market valuation, suggesting that these mismatches often reflect firms' “forced choices” rather than strategic preferences. Finally, analysis of bank-level data shows that the pilot program not only benefits firms but also reduces banks' credit and financial risks. Overall, this paper offers novel insights for policymakers by demonstrating how government interventions can improve corporate financing decisions while reducing systemic financial risks. It contributes to the broader corporate finance literature by highlighting the importance of credit availability in fostering financial stability and sustainable growth, particularly in emerging markets.