Entrusted loans: A close look at China's shadow banking system

Franklin Allen (First Author), Fang Yu (Participant Author), Yiming Qian (Participant Author), Guoqian Tu (Participant Author)

Research output: Contribution to journalJournal

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We perform transaction-level analyses of entrusted loans, one of the largest components of shadow banking in China. Entrusted loans involve firms with privileged access to cheap capital channeling funds to less privileged firms, and the increase when credit is tight. Nonaffiliated loans have much higher interest rates than both affiliated loans and official bank loans, and they largely flow into real estate. The pricing of entrusted loans, especially of nonaffiliated loans, incorporates fundamental and informational risks. Stock market reactions suggest that both affiliated and nonaffiliated loans are fairly compensated investments. (C) 2019 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)18-41
JournalJournal of Financial Economics
Issue number1
Publication statusPublished - 2019

Corresponding author email


Project sponsor


Project name

2004 重点项目 管理科学部 2012 题目

Project No.



  • Credit shortage
  • Entrusted loans
  • Fundamental risk
  • Informational risk
  • Shadow banking

Indexed by

  • FT
  • ABDC-A*
  • Scopus
  • SSCI


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