Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334520 
Year of Publication: 
2025
Series/Report no.: 
BOFIT Discussion Papers No. 14/2025
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
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 for firms' financial management.
Subjects: 
banking
efficiency
precautionary cash holdings
capital management
corporate loans
JEL: 
D25
G21
G28
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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