Abstract

http://ssrn.com/abstract=365641
 
 

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Law, Finance, and Economic Growth in China


Franklin Allen


University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)

Jun Qian


Shanghai Advanced Institute of Finance(SAIF), Shanghai Jiao Tong University; University of Pennsylvania - Wharton Financial Institutions Center; China Academy of Financial Research (CAFR)

Meijun Qian


National University of Singapore

May 7, 2004

U of Penn, Inst for Law & Econ Research Paper No. 03-21

Abstract:     
China is an important counterexample to the findings in the law, institutions, finance, and growth literature: neither its legal nor financial system is well developed by existing standards, yet it has one of the fastest growing economies. We examine 3 sectors of the economy: the State Sector (state-owned firms), the Listed Sector (publicly listed firms), and the Private Sector (all other firms with various types of private and local government ownership). The law-finance-growth nexus established by existing literature applies to the State and Listed Sectors: with poor legal protections of minority and outside investors, external markets are weak, and the growth of these firms is slow or negative. However, with arguably poorer applicable legal and financial mechanisms, the Private Sector grows much faster than the State and Listed Sectors, and provides most of the economy's growth. This suggests that there exist effective alternative financing channels and governance mechanisms, such as those based on reputation and relationships, to support this growth.

Number of Pages in PDF File: 60

Keywords: Law and finance, economic growth, private sector, corporate governance, reputation and relationships

JEL Classification: O5, K0, G2

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Date posted: February 4, 2003  

Suggested Citation

Allen, Franklin and Qian, Jun and Qian, Meijun, Law, Finance, and Economic Growth in China (May 7, 2004). U of Penn, Inst for Law & Econ Research Paper No. 03-21. Available at SSRN: http://ssrn.com/abstract=365641 or http://dx.doi.org/10.2139/ssrn.365641

Contact Information

Franklin Allen
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-3629 (Phone)
215-573-2207 (Fax)
HOME PAGE: http://finance.wharton.upenn.edu/~allenf/

European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Jun Qian (Contact Author)
Shanghai Advanced Institute of Finance(SAIF), Shanghai Jiao Tong University ( email )
211 West Huaihai Road
Shanghai, 200030
China
86-21-62934520 (Phone)
86-21-62934572 (Fax)
HOME PAGE: http://www.saif.sjtu.edu.cn/en/professors/2101
University of Pennsylvania - Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States
HOME PAGE: http://fic.wharton.upenn.edu/fic/
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Meijun Qian
National University of Singapore ( email )
1 Business Link
Singapore, 117592
Singapore
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