The Balance Sheet Channel of Monetary Policy Transmission: Evidence from Chinese Listed Companies

Abstract

Using balance sheet data for a panel of Chinese Listed firms, we try to find evidence of the balance sheet channel of monetary policy transmission. The results indicate that the quality of firms' balance sheet during the tighten period is worse than the quality during the loose period, and the effect of changes in monetary policy on the quality of firms' balance sheet is asymmetric over time. In periods of tight monetary conditions, M1 has significant positive correlation with the interest bear ratio, while the correlation is not significant during loose periods. The results also suggest that the balance sheet channel of monetary policy transmission is not subject to the nature of corporate, while have significant positive correlation with ownership concentration. Small firms bear most of the reductions, they suffer more from monetary tightening than big firms.