Finance Leases: In the Shadow of Banks

Chang, Jeffery (Jinfan), Ting Yang and Yanping Shi, 2022 Finance Leases: In the Shadow of Banks, Review of Finance, Volume 26, Issue 3, May 2022, 721–749.

67 Pages Posted: 29 Jan 2021 Last revised: 30 Sep 2022

See all articles by Jinfan Zhang

Jinfan Zhang

Chinese University of Hong Kong (Shenzhen)

Ting Yang

North China University of Technology

Yanping Shi

University of International Business and Economics (UIBE) - School of International Trade and Economics

Date Written: October 8, 2020

Abstract

By analyzing a hand-collected transaction-level dataset on the finance leases of China’s public firms for the period 2007–19, this article sheds light on China’s leasing market, the second largest in the world. We find that banks use their affiliated leasing firms to provide credit to clients in order to circumvent the government’s targeted credit tightening policy. In contrast to conventional view of regulatory arbitrage, our evidence shows that, rather than hiding risk and gambling for profit, bank-affiliated leasing firms have prudent risk control and efficient pricing. These bank-affiliated institutions are used by banks to play strategic role in relationship banking. The ownership of the lessor matters for the financing choice of the lessee.

Keywords: Finance Lease, Shadow Banking, Relationship Banking, Regulation Arbitrage

JEL Classification: G23, G21, G28

Suggested Citation

Zhang, Jinfan and Yang, Ting and Shi, Yanping, Finance Leases: In the Shadow of Banks (October 8, 2020). Chang, Jeffery (Jinfan), Ting Yang and Yanping Shi, 2022 Finance Leases: In the Shadow of Banks, Review of Finance, Volume 26, Issue 3, May 2022, 721–749., Available at SSRN: https://ssrn.com/abstract=3725600 or http://dx.doi.org/10.2139/ssrn.3725600

Jinfan Zhang (Contact Author)

Chinese University of Hong Kong (Shenzhen) ( email )

Shenzhen
China

Ting Yang

North China University of Technology ( email )

Jinyuanzhuang No.5, Shijingshan District, Beijing
Beijing
China

Yanping Shi

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

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