Yuying Jin a, Dong Zhao b
Author information
a R&D Administration, Shanghai University of Finance and Economics, Shanghai 200433, China
b School of International Business Administration, Shanghai University of Finance and Economics, Shanghai 200433, China
E-mail: jyyshang@mail.shufe.edu.cn (Yuying Jin), remember1027@163.com (Dong Zhao)
We define and quantify for the first time over-credit at the firm level, which refers to the case in which the amount of bank credit that a firm obtains exceeds its expenditure on corporate investment for the year. Then, we explore how over-credit affects corporate investment to determine whether credit expansion in China is consistent with the principle of finance serving the real economy. The results show that over-credit promotes firm investment, and this effect was enhanced by the housing boom. However, the effect of the property market reversed after 2012, owing to China’s economic transition from a quantitative to a structural mismatch between supply and demand. Finally, we explore how over-credit affects the capacity utilization ratio and whether it has aggravated the overcapacity problem in China. The results show that over-credit reduces firms’ capacity utilization ratio. This finding indicates that excessive credit expansion has exacerbated the overcapacity problem in China.
over-credit, corporate investment, capacity utilization ratio
Yuying Jin, Dong Zhao. Does Over-credit Stimulate Corporate Investment? Evidence from Listed Companies in China. Front. Econ. China, 2018, 13(2): 281‒311 https://doi.org/10.3868/s060-007-018-0016-5