In China's credit markets with financial repression, state-controlled non-financial firms (SOEs) are privileged in gaining access to bank credit, while non-SOEs, especially those small- and medium-sized firms, are disadvantaged. Corporate re-lending emerges as a response wherein the former secure bank loans and then re-lend to the latter. We document the characteristics of inter-corporate loans from a sample of legal cases. We employ four empirical strategies to conduct a forensic study of re-lending by detecting abnormal relations between financial accounts of listed firms. State-controlled companies conduct more re-lending, and firms with better growth opportunities, stronger corporate governance, and more financial constraints engage less. We compare re-lending with entrusted loans and find that firms extending nonaffiliated entrusted loans conduct re-lending actively, while firms offering affiliated entrusted loans do not. We also compare inter-corporate loans with micro-credit company loans in a review of legal cases.

We use the 2015 Chinese stock market crash to study the effects of government stock purchases. The Chinese government purchased stocks to stabilize the markets through state-owned financial institutions known as the “National Team.” We find that the intervention led to reduced volatility and price informativeness. These impacts are driven by the disclosure of government portfolios. Consistent with investors having a stronger incentive to acquire government intervention information instead of fundamental news, we find reduced information production and information asymmetry following intervention disclosure. The article suggests that government stock purchases involve a trade-off between stability and informational efficiency.

We identify a positive effect of patent pledgeability on corporate patenting. Our tests exploit staggered city-level policy changes that allow firms to use patents as collateral for financing. We find a significant increase in patents and patent citations for firms headquartered in cities that have adopted such policies relative to firms headquartered in cities that have not. We further show that patent pledgeability increases corporate patenting by inducing firms to shift from secrecy-based innovation to patent-based innovation, rather than by mitigating financial constraints.