Banking competition and gender bank debt bias: evidence from Chinese SMEs

Using bank branching deregulation as a shock to the credit supply of privately owned Chinese small and medium-sized enterprises (SMEs), we show that female owners are more likely to receive bank debt financing after deregulation than male owners. This evidence suggests that increased bank competition contributes to reducing the gender gap in bank debt. The reduction is more accentuated for well-performing female-owned firms, consistent with the view that stronger competition forces banks to engage in less taste-based discrimination. We also find weak evidence that an increase in the number of branches after deregulation, which may have facilitated the information-gathering process, reduces the gender bank debt gap. Our results also show an increase in informal debt for female-owned firms, indicating a complementary role of formal (bank) and informal debt. Findings are robust to a battery of tests accounting for alternative explanations, such as political connections, the growth of foreign banks, stereotypes, growth opportunities, and omitted variables.