Does Bank Loan Ratio Affect Investment of China's Listed Companies?

In this paper, we analyze whether the total debt ratios and bank loan ratios of Chinese listed companies had any impact on their fixed investment in 2001-2006, and whether this impact, if it existed, differed among companies with differing investment opportunities. The analysis led to the interesting result that the bank loan ratio had a stronger impact on fixed investment than the total debt ratio, and actually had the strong effect of restraining investment particularly by low-growth companies, implying that in China, banks supervise the investment activities of companies more strongly. The authors would like to express their gratitude to Hiroshi Gunji, Nao Saito, Takuma Matsuda and anonymous referees of Economics Bulletin for their valuable comments. Any errors and all opinions remain the authors ' own