Major risk shocks, financial relief policies and loan maturity for MSMEs: Evidence from China

ABSTRACT

This paper shows the effect of banking sector financial relief policies on the loan maturity of MSMEs under a major risk shock. Using 259 loan samples from China both before and after the outbreak of COVID-19, I find that financial relief policies reduced the loan maturity of MSMEs by an average of 4%. Two mechanisms are involvedthe proportion of bank liquidity loans increased;banks shortened the loan maturity to respond to the increase in risk-taking of their own. This study provides an example of how macroeconomic policies influence micro-behavior in bank lending decisions. © 2023 Elsevier Inc.