Difference between short-term and long-term effects of bank bailouts on corporate financing policies: case of Chinese banks and listed companies

This article examines the differentiated short- and long-term effects of bank bailouts on the financing policies of listed companies in China between 2000 and 2024. In a context marked by frequent state interventions in the Chinese banking sector, this study questions how these bailouts influence firms' financing choices, particularly in terms of debt, self-financing and securities issuance. Methodologically, we use data from the CSMAR and WIND databases for a sample of more than 1,200 listed companies, coupled with information on bank bailouts identified through annual reports, official announcements, and macro-financial data. The empirical analysis is based on a fixed-effects panel data model, a difference-in-difference (DiD) approach, error correction models (ECM), and an event study, allowing us to isolate short- and long-term effects. Several robustness tests (placebo tests, instrumental variables, alternative regressions) reinforce the validity of the results. The results show that in the short term, bank bailouts have a positive effect on firms' liquidity and access to credit, leading to a temporary increase in debt. In the long term, the effects appear more nuanced: firms most dependent on bank credit tend to maintain a suboptimal financing structure, and a risk of "zombification" is observed in certain underperforming sectors. Moreover, the effects differ depending on the size and sector of activity of the firms. This work contributes to the literature by providing a temporal and institutional interpretation of the effects of bank bailouts in a highly banked emerging economy. It also sheds light on the dilemmas faced by policymakers between financial stabilization and efficient capital allocation.