Financing Source and Firm Growth in a Hybrid Financial System: Evidence from China
44 Pages Posted: 27 Nov 2007 Last revised: 4 Sep 2008
Date Written: August 30, 2008
Using a comprehensive firm-level dataset spanning the period 1998-2005, this paper depicts a detailed picture of China's financial sectors and industrial firms' financing pattern, and provides a thorough investigation of the relationship between financing source and firm growth. We take into account firm surviving selectivity and reverse causality of firm financing source into account, and find that financing source matters for firm growth in China, although this does not tell the whole story. The relative importance of the different financing sources depends on firm ownership and growth channel. We find strong complementarities between formal financing channels and informal ones, and between domestic finance and foreign investment in promoting firm's growth.
Keywords: China, financing source, growth
JEL Classification: O5 G21 G28
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