Finance and Growth for Microenterprises: Evidence from Rural China

European Banking Center Discussion Paper No. 2013-010

CentER Discussion Paper Series No. 2013-053

44 Pages Posted: 23 Sep 2013

See all articles by Thorsten Beck

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Liping Lu

VU University Amsterdam - Department of Finance and Financial Sector Management

Rudai Yang

Peking University - School of Economics

Date Written: September 23, 2013

Abstract

Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur, the initial investment for microenterprises and the use of external finance. Also, we find that the use of informal finance is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions.

Keywords: Finance, Entrepreneurship, Growth, China

JEL Classification: L26, G21

Suggested Citation

Beck, Thorsten and Lu, Liping and Yang, Rudai, Finance and Growth for Microenterprises: Evidence from Rural China (September 23, 2013). European Banking Center Discussion Paper No. 2013-010. Available at SSRN: https://ssrn.com/abstract=2329541 or http://dx.doi.org/10.2139/ssrn.2329541

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Liping Lu (Contact Author)

VU University Amsterdam - Department of Finance and Financial Sector Management ( email )

De Boelelaan 1105
NL-1081HV Amsterdam
Netherlands

Rudai Yang

Peking University - School of Economics ( email )

Beijing
China

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