trust

Interbank Relations, Environmental Uncertainty, and Corporate Credit Access in China

We hypothesize that informal bank networks influence corporate credit access in China. Our sample comprises a panel of 515 corporations listed on China's stock exchanges with a total of 1,052 firm-year observations, holding a total of 7,009 major bank loans from 183 distinct banks between 2007 and 2012. Results support the hypothesis that closure in bank networks facilitates credit access. We further show that the positive closure-performance association offers fewer advantages if financial markets and the legal infrastructure are relatively well developed. Our findings contribute to an emergent literature examining how informal networks can productively substitute weak formal institutions, and how the interplay between informal networks and network embeddedness shapes individual and corporate strategies.

The Impact of Social Beliefs on Microfinance Performance

We apply a panel of 331 microfinance institutions from 37 countries to investigate the relationship between social beliefs and microfinance financial performance over the period of 2003-2011. We find that microfinance institutions in countries with higher levels of trust and more collectivist culture have lower operating and default costs and charge lower interest rates. These results provide the first large cross-country evidence that social beliefs are important determinants of microfinance performance.