Credit Stimulus, Executive Ownership, and Firm Leverage

We show that executive ownership is a significant driver of the demand for credit following credit expansion policies. Our focus on credit demand is in contrast to most studies that have focused on credit supply factors such as bank capital. Our identification exploits the large and unexpected Chinese credit expansion in 2008. This setting offers a unique advantage as in 2008 the Chinese government had almost complete control over the banking sector and it directed the banks to increase credit supply. Thus, in this setting, demand, rather than supply, largely drives the observed changes in firms’ borrowing. We provide extensive robustness tests to validate our results. This paper was accepted by Kay Giesecke, finance.

STOCK LIQUIDITY AND CORPORATE TRADE CREDIT STRATEGIES: EVIDENCE FROM CHINA

This study investigates the nexus of stock liquidity and trade-credit policies in China from 2002 to 2017. The estimates are robust to alternative proxies, various fixed-effects, and the exogenous impact of Chinese split share structure reforms (SSSR) 2005-06 is investigated through the difference-in-difference analysis. The results validate that stock liquidity significantly impacts firms’ capacity to produce more trade credit supplies and less reliant on trade credit demand. The study applied SUEST analysis to investigate the effect of the Chinese institutional setting. The nexus of stock liquidity and trade credit strategies is substantial in state-owned enterprises. Additional analysis revealed that the said association is more visible to credit-constrained and equity-reliant enterprises. The policymakers should focus on market liquidity because it elevates firms’ capacity to mobilize capital through trade credit provisions. The micro aspect of this study suggests that stock liquidity allows managers to shape non-price competitive strategies and avoid excessive usage of trade credits.

Why do households participate in the loan moratorium in Hungary? Theoretical and empirical considerations

In order to mitigate the economic effects from the COVID-19 epidemic, a moratorium on loan repayments was introduced in several countries, including Hungary. Essentially, a loan moratorium provides additional finance for participants, allowing theories of both credit demand and consumption to be tested on debtors’ decisions as to whether or not they participate in the programme. In this paper, we use a linear probability model on the Hungarian survey data to examine the driving factors behind the households’ decision to participate in the scheme. Our results show that the younger debtors and those with more children are more likely to utilise the programme. Stretched financial situations, i.e., lower incomes, lower savings and higher payment-to-income ratios, increase the probability of continued participation as well. The chance of participating in the scheme also increases significantly when a household has faced borrowing constraints over the past two years, i.e., it has not been or only partially been able to satisfy its credit demand.

What does Google say about credit developments in Brazil?

In this paper multivariate State Space (SS) models are used to evaluate and forecast household loans in Brazil, taking into account two Google search terms in order to identify credit demand: financiamento (type of loan used to finance goods) and empréstimo (a more general type of loan). Our framework is coupled with nonlinear features, such as Markov-switching and threshold point. We explore these nonlinearities to build identification strategies to disentangle the supply and demand forces which drive the credit market to equilibrium over time. We also show that the underlying nonlinearities significantly improves the performance of SS models on forecasting the household loans in Brazil, particularly in short-term horizons.

Loan Officer and the Evolution of Bank-SMEs Relationship in Tunisia

This paper empirically investigates the role of the loan officer in the evolution of the bank-SMEs relationship and its motivation for studying credit demand, its level of alignment to the hierarchy and its participation in the decision-making process. Based on a survey of 160 loan officers from two large Tunisian commercial banks: the ‘Société Tunisienne de Banque’ (STB) – as a public bank, and the ‘Banque Internationale Arabe de Tunisie’ (BIAT) – as a private bank, data analysis shows that self-esteem, need for success, autonomy in performing duties, and participation in the decision-making process are motivating factors at work for loan officers at both banks. The number of visits to the premises of the SME and the average length of interviews with its manager are considered important for the acquisition of soft information. Regarding the decision-making power, while a certain delegation has been instituted at the regional level in the BIAT, it is more the responsibility of the central committees in the STB. The decision of evolution depends more on the hierarchical superiors in a private bank that is why the BIAT officers are closer to their superiors than those of the STB.

Households’ credit demand: Main trends and characteristics for Ukraine

Household demand for credits is quite volatile, which requires constant evaluation of it changes. The purpose of the paper is to identify quantitative signals, the use of which increases the predictability of the credit market development. The study utilizes technical analysis methods for an econometric estimation of trends in household demand for credits in Ukraine for the 2002–2019 period. Based on the analysis of historical market lows, it was argued that with all the negative effects of destabilizing factors, the household demand for loans will not fall below the market support point of UAH 50 million. The financial behavior of Ukrainian households when choosing the type of loan is stable and does not change with fluctuations in GDP. Short-term loans are quite dynamic and largely depend on macroeconomic conditions, provoking market movements. If the relevant direction is supported by medium-term loans, the general market trend will correspond to the GDP trend. The demand for long-term loans is quite inertial, its change does not affect the overall market trend. The constant and variable elements of household demand for credit are highlighted.

The Expansion of Consumer Credit in Italy and the Main Euro Area Countries

Since 2015, consumer loans have been rising fast in France, Germany, Spain and Italy. This article aims to provide broad evidence of the differences across countries in light of the recent consumer credit growth, exploring demand and supply factors typically related to this type of loan, and assessing the building up of financial risks. The expansion was connected in all countries with the increasing credit demand, specifically for consumer durables, and – for Italy and Spain, which experienced stronger credit tightening during the past crises – also with the easing of supply conditions. Risks stemming from the growth of consumer credit are mitigated by its lower incidence, compared with mortgages, on households’ total debt and income; exposure to interest rate risk is also decreasing owing to the high share of fixed-rate contracts. There is wide risk heterogeneity across countries, with Italy and Spain having the highest share of delinquent households (even for fewer than 90 days). In Italy, however, debt is increasingly concentrated among more affluent households, which are better able to withstand negative economic shocks. This trend is sustaining the drop in the ratio of new non-performing consumer loans.