Original scientific paper
https://doi.org/10.1080/1331677X.2019.1656099
Political connections and household access to bank loans: evidence from China
Linyang Li
Niels Hermes
Robert Lensink
Abstract
Using data from a large household survey among 8,438 households
in China in 2011, we analyse whether the fact that a household
head is a member of a political party in China increases the probability
that the household has access to a bank loan. We investigate
how these connections influence the decision of households to
apply for a bank loan (i.e., the demand side) and the decision of the
bank to approve the loan (i.e., the supply side). We show that political
connections are positively associated with both the households’
willingness to apply for a loan, as well as with the probability that
they get a loan from the bank. We make two contributions to the
literature on the determinants of households’ access to credit. We
are the first to analyse the role of political connections as a determinant
of households’ access to bank loans. Second, we analyse the
role of political connections throughout the process of allocating
bank loans, i.e., we decompose the loan application process into the
households’ self-selection process and bank’s selection process
Keywords
political connections; household finance; bank loans; China
Hrčak ID:
254385
URI
Publication date:
9.2.2021.
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