Summary:
One prominent feature of the current economy is the emergence of a complex production network among various sectors and firms through supply chains, rather than simple upstream and downstream relationships (Carvalho, 2014). The formation and stability of production networks facilitate the exchange of information and technological collaboration across different sectors, improving corporate performance (Bernard et al., 2019) and contributing to both national and global economic growth. However, complex production networks can also serve as channels through which systemic shocks propagate, potentially amplifying the adverse effects of macroeconomic fluctuations (Acemoglu et al., 2012; Baqaee, 2018). Compared to the potentially enormous economic losses that may result from shocks to production networks, most existing finance and accounting research focuses on examining the spillover effects of operational or financial risks between upstream and downstream firms within supply chains (Chiu et al., 2019; Costello, 2020), while neglecting the possibility that idiosyncratic micro-level shocks between these firms could accumulate into systemic shocks affecting the entire production network (Ahern and Harford, 2014). The limited existing research on production networks primarily examines the economic impacts and risk mitigation strategies from the perspective of individual firms when the production network is subjected to shocks (Ahern and Harford, 2014; Aobdia et al., 2014; Barrot and Sauvagnat, 2016; Gao, 2021). However, few studies have explored risk prevention before shocks and the post-shock recovery of supply chains from the perspectives of bank lending decisions, as well as government monetary, fiscal, and industrial policies. In fact, bank lending policies and government economic policies are common measures used to prevent macroeconomic fluctuations and can significantly influence such fluctuations. Therefore, conducting related research from the perspective of production networks offers important theoretical implications for understanding the sources, transmission, and prevention of macroeconomic risks more comprehensively. Simultaneously, it provides practical insights for governments and banks to enhance the stability and resilience of production networks, thereby advancing the modernization of supply chains and achieving high-quality economic development in China. Based on these backgrounds, our study investigates whether and how banks consider potential shocks faced by firms in different sectors in the production networks when making lending decisions. We choose A-share listed firms in China's capital market from 2002 to 2022 as the research sample. All financial and corporate governance data of the sample are sourced from the CSMAR and CNRDS databases, while the centrality of the sectors is calculated based on the Input-Output Tables published by the National Bureau of Statistics from 2002 to 2020. Our findings indicate that firms with higher centrality in the production network may face greater potential shocks. Considering both banks' own risk management and government policy objectives, banks are likely to provide these firms with more long-term (and less short-term) loans, especially for state-owned enterprises and sectors whose output is crucial to the national economy. Further analysis suggests that long-term loans help reduce the performance volatility of these central firms. These findings suggest that banks can act as an economic stabilizer by mitigating the risks associated with potential shocks to China's production network through their lending decisions. Possible contributions of our paper lie in the following aspects: First, in the field of finance and accounting research on production networks, most existing literature focuses on the spillover effects of operational or financial risks between upstream and downstream firms in supply chains (Chiu et al., 2019; Costello, 2020). This paper fills a gap by examining banks' preemptive risk mitigation of potential shocks from the perspective of production networks, addressing the limitations of previous research that focused solely on firm-level interactions within supply chains. Second, regarding the factors influencing bank lending, previous research primarily examined firms' characteristics from the perspective of individual firms or supply chains (Giannetti et al., 2011; Donovan et al., 2021). This paper explores the role of bank lending in mitigating potential shocks from the perspective of production networks, providing deeper insights into the micro-level mechanisms through which banks influence economic growth and macroeconomic fluctuations. This has important practical implications for governments and banks in enhancing the stability and resilience of production networks, modernizing industrial and supply chains, and ultimately achieving high-quality economic development in China. Future research can be expanded in two directions: First, regarding endogeneity issues, future studies could consider exogenous shock events such as the U.S.-China trade war and the COVID-19 pandemic. Second, future research could delve deeper into the role of government monetary, fiscal, and industrial policies in preventing risks before shocks and restoring supply chains after shocks. Finally, future research could consider the availability of data on firms' credit demand to better disentangle the independent effects of both supply-and demand-side factors on long-term credit decisions.
江伟, 李钰, 雷婧祯. 生产网络中心性与银行信贷决策[J]. 金融研究, 2025, 536(2): 95-113.
JIANG Wei, LI Yu, LEI Jingzhen. Production Network Centrality and Long-term Bank Lending Decisions. Journal of Financial Research, 2025, 536(2): 95-113.
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