*Corresponding author: Jiajun Xu

Affiliation: Institute of New Structural Economics, National School of Development, Peking University

Address: Langrun Garden 165, Yiheyuan Road No. 5, Peking University, Beijing, P.R. China, 100871

E-mail: jiajunxu@nsd.pku.edu.cn

Abstract:

We analyze why national development banks (NDBs) may provide longer-term loans to firms than private commercial banks (PCBs). If NDB bonds have higher collateral value than PCB bonds, then NDBs may lend longer-term than PCBs. NDBs may enjoy higher recapitalization willingness and capacity by the state and hence greater collateral value than PCBs. Moreover, NDBs may have advantages over state-owned commercial banks if NDB bonds enjoy higher market liquidity. However, NDBs may suffer from poor monitoring quality owing to undue political intervention, thus undermining collateral value. Our study implies that NDBs are not substitutes for but complements to PCBs.

JEL classification: 

E44; G01; G21; G28; H81

Keywords: 

loan maturity; collateral capacity; recapitalization; monitoring quality; market liquidity; national development banks.

Article Link:

https://doi.org/10.1111/irfi.12391