The Implications of Faster Lending: Loan Processing Time and Corporate Cash Holdings
Type
working paper
Date Issued
2025-01
Author(s)
Abstract
A unique natural experiment in China-the city-level staggered introduction of administrative approval centers (AAC)-reduces bank loan processing times by substantially speeding up the process of registering collateral without affecting credit decisions. Following the establishment of an AAC, firms significantly reduce their cash holdings. State-owned enterprises are less affected. Cash flow sensitivity of cash holdings decreases, as does the cash flow sensitivity of investment. The share of short-term debt increases, while inventory holdings and reliance on trade credit decrease. Defaults also decrease. These results suggest that timely access to credit has important implications on firms' financial management.
Keywords
JEL classification: D25
G21
G28
G32 banking
efficiency
precautionary cash holdings
capital management
corporate loans
Publisher
Elsevier BV
File(s)![Thumbnail Image]()
open.access
Name
faster lending.pdf
Size
832.27 KB
Format
Adobe PDF
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