Ownership Networks and Firm Growth: What Do Forty Million Companies Tell Us About the Chinese Economy?
56 Pages Posted: 16 Oct 2019 Last revised: 28 May 2021
Date Written: October 6, 2019
The finance–growth nexus has been a central question in understanding the unprecedented success of the Chinese economy. Using unique data on all the registered firms in China, we build extensive firm-to-firm equity ownership networks. Entering a network and increasing network centrality leads to higher firm growth, and the effect of global centralities strengthens over time. The RMB 4 trillion stimulus launched by the Chinese government in 2008 partially “crowded out” the positive network effects. Equity ownership networks and bank credit tend to act as substitutes for state-owned enterprises, but as complements for private firms in promoting growth.
Keywords: Ownership network; Equity capital; Firm growth; Bank credit
JEL Classification: G10; G30; L14
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