Internal Finance and Growth: Microeconometric Evidence on Chinese Firms

38 Pages Posted: 11 Nov 2008

See all articles by Alessandra Guariglia

Alessandra Guariglia

Durham University - Durham Business School

Xiaoxuan Li

Chinese Academy of Sciences (CAS) - Institute of Policy and Management

Lina Song

Nottingham University Business School

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Abstract

Does the availability of internal finance constrain firm growth? Or does it foster it? To answer these questions, we use a panel of 407,096 Chinese firms over the period 2000-2005. We estimate dynamic assets growth equations augmented with cash flow, and find that the growth of state owned enterprises is not affected by cash flow, while that of privately owned firms is most affected. Considering that they represent 62% of the observations in our sample and that, in spite of being typically discriminated against by financial institutions, private firms have experienced sensational growth rates, our results suggest that internal finance has fostered rather than constrained their growth.

Keywords: assets growth, cash flow, financial constraints

JEL Classification: D92

Suggested Citation

Guariglia, Alessandra and Li, Xiaoxuan and Song, Lina, Internal Finance and Growth: Microeconometric Evidence on Chinese Firms. IZA Discussion Paper No. 3808, Available at SSRN: https://ssrn.com/abstract=1298251 or http://dx.doi.org/10.2139/ssrn.1298251

Alessandra Guariglia (Contact Author)

Durham University - Durham Business School ( email )

Durham Business School
Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Xiaoxuan Li

Chinese Academy of Sciences (CAS) - Institute of Policy and Management

No.15 ZhongGuanCun BeiYiTiao Alley
Haidian District
Beijing, 100190
China

Lina Song

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road,
Nottingham, NG8 1BB
United Kingdom
0115 8466217 (Phone)

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