The Aftermath of Corporate Default with Chinese Characteristics

We study lending, default, and default resolution with seven million loans by seventeen commercial banks to corporations across China from 2007 to 2013. Politically connected borrowers perform poorly on several dimensions of the lending process, even with improvements in bankruptcy law, government action at times of crisis, or listing on China's stock market. In contrast, evidence of relationship banking and improvements in some lending outcomes for other borrowers and in provinces with higher institutional and economic development suggest gradual though uneven emergence of a modern capital market.