Publication Type

Journal Article

Publication Date

5-2015

Abstract

Credit borrower concentration arises when a bank or financial institution lends a large amount of its funds to a few large borrowers. We find that borrower concentration is positively related to non-performing loans and negatively related to financial performance. We also find that the voting power of bank’s controlling shareholder is positively related to the borrower concentration. The evidence is consistent with the view that controlling shareholders divert resources away from banks by extending a high volume of loans to a few related parties, which leads to high borrower concentration. Further evidence indicates that some seemingly unrelated large borrowers, as reported in the financial disclosure, are actually related to the controlling shareholders. We also provide evidence that going public mitigates the tunneling activities of controlling shareholders.

Keywords

Borrower concentration, Related lending, Banks, Tunneling, China

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Banking and Finance

Volume

54

First Page

208

Last Page

221

ISSN

0378-4266

Identifier

10.1016/j.jbankfin.2015.01.011

Publisher

Elsevier

Additional URL

https://doi.org/10.1016/j.jbankfin.2015.01.011

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