Formal versus Informal Finance: Evidence from China

Autor: Vojislav Maksimovic, Asli Demirguc-Kunt, Meghana Ayyagari
Rok vydání: 2010
Předmět:
Saving and Capital Investment
Economics and Econometrics
Financial intermediary
Access to Finance
Banks&Banking Reform
Debt Markets
Bankruptcy and Resolution of Financial Distress
Size
Diversification
and Scope L250 [Firm Performance]
Financing Policy
Financial Risk and Risk Management
Financial Economics P340 [Socialist Institutions and Their Transitions]
Corporate finance
Trade credit
Banks
Credit history
Accounting
0502 economics and business
Line of credit
External financing
050207 economics
Financial Markets [Economic Development]
Finance
Mortgages G210
050208 finance
Capital and Ownership Structure G320
business.industry
05 social sciences
1. No poverty
Other Depository Institutions
Corporate Finance and Governance O160
Micro Finance Institutions
Internal financing
Access to finance
business
Zdroj: Formal Versus Informal Finance : Evidence From China
DOI: 10.1093/rfs/hhq030
Popis: China is often mentioned as a counterexample to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China's growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.
Databáze: OpenAIRE
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