Abstract
Based on the turnover data of provincial party committee secretaries in China between 2000 and 2008, we find that the loan increment of local SOEs (state-owned enterprises) decreases by 18.9% in turnover years. We also document increased efficiency of long-term loans in turnover years. The effects of provincial leader turnover on bank loans only exist for local SOEs in eastern regions and more marketized provinces. Local officials have less of a political incentive to exert influence on bank credit allocation in turnover years, and therefore banks act as more effective intermediaries in optimizing credit allocation and improving the efficiency of loans.
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