How Does Corporate Governance Affect Loan Collateral? Evidence from Chinese SOEs and Non-SOEs

摘要

We examine the effect of corporate governance on the collateral requirements for firms' bank loans in China. We find that firms with lower excess control rights and other large shareholders face lower collateral requirements, which is more pronounced in non-state-owned enterprises (SOEs) than in SOEs. Regarding board characteristics, we find that smaller board size, more independent directors, separation of the positions of CEO and chairman, and larger supervisory board size can reduce a firm's use of collateral; the effect of all the preceding characteristics is more pronounced in SOEs. Overall, our research suggests that, in China, corporate governance structures are able to affect bank-lending decisions in respect of collateral requirements and that the influence depends on the controlling shareholder type and associated agency problems.