Finance Leases: In the Shadow of Banks

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