Bank Loans Research Articles

Political uncertainty, bank loans, and corporate behavior: New investigation with machine learning

This paper investigates how uncertain term length, a novel source of political uncertainty, affects the behaviors of banks and firms using a machine-learning approach. China's local authorities do not have a fixed term, creating an ideal environment for studying how economic agents react to their perception of political uncertainty without an actual political turnover. We implement a machine-learning method to predict the term length of city leaders by observing others with similar backgrounds. Combining this new measurement of political uncertainty and bank- and firm-level data, we find an inverted U-shaped relationship between city leaders' predicted remaining term length and bank loans, corporate liabilities, and investment, which matches the change of political uncertainty over the term. We also record the potential adverse consequences of the politically motivated loan and investment expansion, such as a loss of corporate efficiency and a disruption in market order.

The Impact of Transaction Credit on Credit Enhancement of Supply Chain Financing of Small and Micro-Logistics Based on Evolutionary Game Analysis

The issue of credit enhancement in supply chain financing for small and micro-logistics enterprises (SMLEs), as well as the factors that affect the decision-making of participants in supply chain financing transaction credit enhancement, is analyzed in this study. First, an evolutionary game model between financial institutions (FIs) and SMLEs was built. In contrast to bank loans, a novel mechanism for achieving credit enhancement based on transaction data in the transportation supply chain was established through a strict environment and an increase in default penalties to compel SMLEs to uphold their obligations. Furthermore, the stability analysis shows that the stable state convergence of the evolutionary game between FIs and SMLEs evolves to the stage where FIs offer loans to SMLEs. Finally, according to the simulation analysis on the real data collected from CHZL logistics park survey data, this work demonstrates that the fluctuation ranges of the strategy evolution process for the FIs and SMLEs are positively correlated with the intensity of the stochastic perturbation.

Official visits and stock price crash risk

Against the backdrop of continuous stock price crashes, preventing stock price crash risk has become an increasingly important item on the Chinese government's agenda in recent years. Using a unique dataset on official visits manually collected from news reports posted on corporate websites during the 2010–2020 period, we examine the impact of official visits on the stock price crash risk of visited companies. We find that official visits contribute to a reduction in stock price crash risk. This effect is more pronounced among privately controlled companies, information-opaque companies, and financially constrained companies. Taking the political rankings of visiting officials into consideration, we find that municipal officials have a more significant influence on stock price crash risk. We further establish the underlying mechanisms and find that official visits reduce crash risk through the provision of more preferential resources, such as government subsidies and bank loans, and by attracting more public attention, such as media and analyst coverage. Overall, our research provides evidence on how officials can prevent stock price crash risk.

Credit in agrarian India: narrative policy struggles over farmer surplus

Debt is fundamental to agrarian life across the world. In India, over half of agricultural households are indebted and borrow from myriad credit sources. Formal institutional credit (e.g., bank loans) has historically, and up to the present day, been proposed as a tool for rural development and to eliminate exploitative informal moneylenders. This is true in India, where despite decades of state policies to displace informal lending using formal credit, informal lending persists and increasing debt is an ever-present symptom of the agrarian crisis. Informal lending made up 30% of farmers’ credit sources in 2019; for farmers who owned less than 0.01 ha of land, this was 71.8%. In this paper we provide an historical examination of the numerous state responses to the proliferation of agrarian debt, surveying lending policy as a state development tool in India. We analyze how moneylending has been treated in different historical periods and the increasing participation of the state (from colonial to present times) in agrarian debt and use a Narrative Policy Analysis to synthesize the underlying “narratives” that characterize evolving policy forms. In the process, we reveal not only a consistent narrative assuming the displacement of informal credit with formal credit, one contradicted by the situation on the ground: an absolute increasing trend in borrowing, and a crucial propagation of the number and variety of credit sources. This we observe to be precisely a result of the largely fruitless state effort to formalize credit and to eliminate informal lending. This persistent discourse that posits formality as a solution to informality, we further conclude, is not only a cultural project of the colonial, post-colonial, and modernization state, but one essential for the circulation and accumulation of capital, enhancing its urgency. The failed effort to eliminate informal lending has resulted, furthermore, in a decline in farmer autonomy and the creation of a state-underwritten struggle − between multiple actors in the credit sector − over the redistribution of agrarian surplus.

Assessing the impact of deposit benchmark interest rate on banking loan dynamics

Assessing the impact of deposit benchmark interest rate on banking loan dynamics

A Comparative Analysis of Data Balancing Techniques in Machine Learning for Enhancing Bank Loan Default Risk Predictions

A Comparative Analysis of Data Balancing Techniques in Machine Learning for Enhancing Bank Loan Default Risk Predictions

Edukasi Keuangan dan Pemasaran untuk Peternak Jangkrik: Kunci Kesuksesan UMKM

This community service activity aims to enhance the knowledge of cricket farmers in financial recording and marketing strategies to help their businesses grow effectively. Conducted on May 25, 2024, this event took place at a cricket farming UMKM (Micro, Small, and Medium Enterprises) located on Jln. Benda Permai II, Pd Benda, Pamulang District, South Tangerang. The activity is a collaboration between Sekolah Tinggi Ilmu Ekonomi Ganesha (STIE GANESHA) and local farmers. The program ran from 08:00 to 12:00 WIB and aimed to apply knowledge and research findings to improve community welfare. The participating lecturers conducted research covering digital marketing, financial analysis, and human resource development. The results of this research are expected to improve production efficiency, marketing, and financial management of UMKM. The main problems faced by the farmers include limited access to bank loans and a lack of strategies to increase sales. Through this program, STIE Ganesha is committed to supporting and developing the potential of local UMKM, while also contributing positively to the welfare of the South Tangerang community.The results of this activity showed an increase in financial and marketing literacy among cricket farming UMKM owners. Jhandriansyah, a dim sum entrepreneur and cricket farmer, expressed his gratitude for the guidance provided, stating that the collaboration with STIE Ganesha greatly helped his business grow

Corruption’s impact on non-performing loans of banks in emerging markets: Empirical insights

PurposeThis study investigates the impact of control of corruption (COC) on nonperforming loans (NPLs) in South Asian countries. MethodologyThe present study selected three South Asian countries (Pakistan, India, and Bangladesh) from 2000 to 2019. Further, the current research employed the fixed effect model (FEM) analysis on a sample of 81 conventional banks based in South Asian countries. FindingsThe result reveals that control of corruption has a significant and negative association with NPLs, indicating that weak control of corruption would lead to an increase in NPLs in the sample countries. ImplicationsThe findings provide insights to the policymakers in making strategic decisions about NPLs regarding control of corruption impact. OriginalityThe significant increase in NPLs is worrying as it may undermine banks’ ability to grant credit and support a country’s economic recovery. The increasing trend of NPL rates and limited studies in related literature assessing NPLs in the South Asian region has motivated this study, which examines the external and internal factors that may influence NPLs.

The role of geographical distance for investment decisions in crowdinvesting

ABSTRACT Startups rely on alternative forms of financing, such as crowdinvesting, as they usually miss reliable credit ratings and bank loans. We explore the role of geographical distance between investors and startups, and analyze the role of signals and the investor-startup-relationship in investment decisions. Using a unique proprietary dataset from the largest crowdinvesting platform in Mexico, we show that distance between investors and startups negatively affects the investment probability and investment amount. An investor-startup-relationship only diminishes this correlation in specific instances while observable signals do in any case. Evidence is in line with the idea that investors with a close relationship to a startup should be used as fallback options instead of exclusive investors in startups’ early development stage. Furthermore, it underscores that signals are of high importance in modern forms of financing.

MD&A readability and bank loan contracting: evidence from China

ABSTRACT We investigate whether and how the textual characteristics of management discussion and analysis (MD&A) can affect bank loan contracting using a sample of 31,141 loan-firm-year observations in China. We document a strong negative relationship between a firm’s MD&A readability and its cost of borrowing, in line with the argument that banks incorporate borrowers’ information risk into pricing. Cross-sectional analyses suggest that the relation between MD&A readability and loan contract terms is less pronounced when borrowing firms are state-owned or have political connections, when firms are located in areas with more developed credit markets, and when lending banks are large shareholders.

El papel de los préstamos y del ICAS BE en el marco de colateral del Eurosistema en 2024

Rationale This article analyses the developments over the last 12 months in the share of non-marketable assets (essentially bank loans) pledged as collateral in the Eurosystem’s monetary policy credit operations, focusing in particular on the actual and potential contribution of the Banco de España’s in-house credit assessment system (ICAS BE). Takeaways •Over the last 12 months the share of non-marketable assets in the collateral pledged by Spanish counterparties in Eurosystem financing operations has increased once again, marking a continuation of the upward trend that began after the onset of the COVID-19 crisis. The proportion of non-marketable assets that are loans to firms rated using the ICAS BE has also risen. •Counterparties have ample scope to increase the volume of ICAS BE-rated pledged loans, especially in the case of loans to small and medium-sized enterprises. •After improving for two years, Spanish firms’ credit ratings assigned by the ICAS BE have deteriorated slightly compared with 2023, above all due to the increased interest burden firms are currently shouldering.

Enhancing Bank Loan Approval Efficiency Using Machine Learning: An Ensemble Model Approach

Enhancing Bank Loan Approval Efficiency Using Machine Learning: An Ensemble Model Approach

Social responsibility and corporate borrowing

We study the impact of social capital, measured by corporate social responsibility (CSR) performance, on corporate borrowing. Using a sample of 120,204 bank loan applications of China's listed firms, we find that an increase in CSR performance increases the loan amounts of approved loans, although it does not alter the likelihood of loan approval. Using aggregate loans at the firm level, we show that CSR performance positively impacts firms' long-term borrowing from banks but does not affect their short-term borrowing. The economic magnitude of the positive effect is large at both the loan and firm levels. We attribute this positive relationship to reduced information asymmetry and improved risk mitigation. Surprisingly, we find that banks do not discipline their borrowers' CSR investments through the lending relationship. Specifically, when borrowers exhibit high CSR performance and borrow from banks with high CSR performance, further increases in CSR no longer correlate with larger loan amounts. Our findings suggest that China's state-led green credit policies should be more market-oriented.

Critical analysis of non-price actions driving installation of biogas technology to upgrade existing buildings in Ghana: a demand theory approach

The gradual degradation of faeces and other organic materials through the process of fermentation results in the manufacture of biogas. Generally, as the cost of construction increases, the demand for biogas should fall, which in this case is the opposite. Thus, this study seeks to identify drivers of the current surge in the installation of the biogas system in Ghana for the decisions that could be implemented to reinforce gains. This study adopted a quantitative survey-based assessment approach to identify the drivers for policy formulation. The results show that reductions in greenhouse gas (GHG) emissions, training of trainees and the community, cost savings, public education, bank loans, available waste stock, etc. are the key drivers accelerating the continuous growth of the industry in Ghana. Furthermore, a high degree of agreement was observed from the participants regarding the non-price drivers of biogas. The results present government agencies including the Ministry of Energy, the Energy Commission and industries with an action plan to restructure the concept of renewable energy sources in Ghana. Overall, this study provides a comprehensive outlook of biogas generation system, which could be explicitly used in capacity development to create a sustainable progress of biogas development in Ghana.

The impact of sustainable development policy for resource-based cities on green technology innovation: Firm-level evidence from China

The sustainable development policy targeting resource-based cities (RBC) is a critical measure initiated by China's government to transform these cities. Green technology innovation (GTI) has surfaced as a pivotal route in achieving sustainable development in RBCs. However, whether implementing this policy can induce GTI remains underexplored. To fill this gap, exploiting the National Plan for Sustainable Development of Resource-based Cities (2013–2020) (NPSDRC) as a quasi-natural experiment, we employ the difference-in-differences (DID) method to examine the influence of NPSDRC on corporate GTI and potential mechanisms. We observe that NPSDRC significantly reduces the GTI of RBC enterprises. Mechanism analysis reveals that NPSDRC escalates environmental governance costs and decreases R&D investment, impeding corporate GTI. Meanwhile, our findings suggest that providing more bank loans and tax incentives could weaken this adverse effect on corporate GTI. Heterogeneity results indicate that non-SOEs, enterprises with weak financing capabilities, enterprises with long-sighted vision, and high energy consumption enterprises are more susceptible to the influence of NPSDRC. This study offers empirical evidence for countries seeking to employ policies to drive the transformation of RBCs.

The Role of Capital Markets for Small and Medium-Sized Enterprise (SME) Finance

SMEs play a crucial role for inclusive development, but their growth is often hampered by lacking access to finance. This paper explores whether capital markets can be harnessed to foster SME finance. Given the negligible use of market-based financing by SMEs, it is analysed to what extent capital market development indirectly alleviates SMEs’ financing constraints by improving their access to loans. Thus, the study builds on the theoretical model by Song and Thakor (2010), which consolidated the view that markets and banks are complementary and co-evolve. Using a modification of the analysis framework by Rajan and Zingales (1998) for 68,712 firm-level observations from 50 mostly low- and middle-income countries for 2006-2019, it empirically investigates the central prediction of Song and Thakor (2010) that capital market development is associated with an increase in bank lending, in particular, towards smaller and riskier firms. I find a positive and significant effect; in support of Song and Thakor (2010), the effect runs through increased capital market usage by financial institutions and expanded loan availability. The findings underline that markets and banks co-evolve and that the most important contribution of capital markets to SME finance is their indirect effect on bank lending and loan availability.

Business and Financing Strategic in Entering a Biomass New Business (Case Study: PT ABC, in West Java)

Biomass is a renewable alternative fuel source that is more environmentally friendly than other fuels. Currently PT ABC has a biomass plant that produces wood chips and wood pellets in the West Java region. The purpose of this study is to analyse the business strategy and funding needed by PT ABC to enter the biomass industry in West Java. The research method used is a combination of descriptive and case study methods, with data collection through interviews, document analysis, and direct observation. SWOT, PESTEL, and Porter’s Five Forces analyses were conducted to evaluate the company’s internal and external situation. Furthermore, this research designs the right funding strategy based on 5 funding alternatives sourced from venture capital, Angel Investors, Banks, IPOs and Bonds. Based on the comparison results, alternative 3 (Bank Loan) is more profitable. This alternative provides NPV of Rp 8,503,386,171.21, Internal Rate of Return (IRR) of 31%, Payback Period (PP) for 4 years. This alternative will increase the value of the company in several ways such as diversification of financial risks, tax benefits on interest payments, guaranteed retained earnings, quick disbursement of funds, and maintaining the balance of shareholders’ equity. The findings of this study highlight the huge potential of the biomass market in West Java and Indonesia, and the importance of an appropriate funding strategy. This research provides valuable insights for companies looking to enter the biomass industry.

Environmental Penalties and Financing Punishment: Evidence from Incremental Bank Loans

ABSTRACT This study examines the impact of environmental penalties on corporate incremental bank loans. The results show that both the frequency and degree of environmental penalties significantly reduce corporate incremental bank loans, indicating that corporate environmental penalties lead to “financing punishment” by damaging corporate reputation and increasing risks. This financing punishment can be alleviated by good CSR performance and CSR assurance, indicating that exemplary CSR performance and assurance can provide an “insurance” effect to influence bank loans when a firm has a negative event. We also find that this financing punishment has intra-industry peer effects, suggesting that the environmental penalties incurred by one firm can influence the broader credit decisions of commercial banks within the same industry.

Directed Lending System in India: A Review

Directed Lending has grown in significance since the nation's banks were nationalized. Commercial banks' Directed lending quotas have given birth to a significant instrument for distributing capital to self-employment programs, small businesses, and farmers. Priority sector requirements mandate that scheduled commercial banks lend forty percent of their total loan volume to the designated directed sectors in accordance with RBI directions. Over the years, the RBI has implemented numerous modifications to the standards for Directed Lending. The issue of NPA is not exclusive to Indian public sector banks; it is prevalent across the whole banking sector. A significant proportion of non-performing loans in Indian banks originated from credit to the directed sector under the influence of officials in charge of government. Had banks adequately supervised their credits, the issue of bad debt might have been controlled, if not eradicated. To determine how effective and efficient banks were, the majority of researchers relied on the DEA model. Fixed and random effect model, t test, Tobit regression, CCR, BCC are used to get the desired result. It is also found in different studies that there is one major issue, which is NPA. In this study, we try to find out the reasons and suggestions regarding NPA.

Financial security of Ukraine under martial law: Impact of macroeconomic determinants

Russia’s open aggression against Ukraine has resulted in significant changes across all sectors of the Ukrainian economy and its financial sphere, including financial security. The paper aims to identify the impact of the primary macroeconomic determinants, i.e., military defense spending, non-performing bank loans, exchange rate, foreign debt, and state (total) reserves, on the financial security of Ukraine under martial law. The canonical correlation analysis is employed to assess the strength of the relationship between the above macroeconomic indicators and the level of the state’s financial security. It was found that the reduction of the state’s financial security level in 2022 was 63.9%, explained exactly by the changes in the above macroeconomic determinants after the start of a full-scale invasion. The study determined the degree of influence of each indicator on Ukraine’s financial security level. An increase in the level of military defense spending, non-performing bank loans, hryvnia’s devaluation, and external debt growth had a direct negative impact on Ukraine’s financial security. At the same time, an upsurge in total reserves had an indirect negative impact (through the external debt growth). The research findings confirm the necessity for effective monitoring and management of the macroeconomic indicators to maintain both Ukraine’s financial security and macro-financial stability in order to ensure its’ sustainable economic development during the postwar recovery period. AcknowledgmentThis research is financially supported by the NATO SPS Program “Security of territorial communities: evidence from the Eastern European countries”.