Does the Chinese Banking System Promote the Growth of Firms?

World Economy & Finance Research Programme Working Paper No. 0036

21st Australasian Finance and Banking Conference 2008 Paper

28 Pages Posted: 12 Jun 2008 Last revised: 7 Aug 2008

See all articles by Panicos Demetriades

Panicos Demetriades

University of Leicester - Department of Economics

Jun Du

Aston University, Aston Business School, Economics and Strategy

Sourafel Girma

Nottingham University Business School

Chenggang Xu

University of Hong Kong

Date Written: February 2008

Abstract

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China's industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Keywords: Chinese banking system development, value added and TFP growth, panel dataset

JEL Classification: E44, O53

Suggested Citation

Demetriades, Panicos O. and Du, Jun and Girma, Sourafel and Xu, Chenggang, Does the Chinese Banking System Promote the Growth of Firms? (February 2008). World Economy & Finance Research Programme Working Paper No. 0036; 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1143426 or http://dx.doi.org/10.2139/ssrn.1143426

Panicos O. Demetriades (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom
+ 44 116 252 2835 (Phone)
+ 44 116 252 2908 (Fax)

HOME PAGE: http://www.le.ac.uk/economics/staff/pd28.html

Jun Du

Aston University, Aston Business School, Economics and Strategy ( email )

Aston Triangle
Birmingham, B4 7ET
United Kingdom
004401212043340 (Phone)

HOME PAGE: http://www.abs.aston.ac.uk/newweb/staff/detail.asp/sfldStaffID=A0000717

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Chenggang Xu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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