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

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Junhui Cai

University of Pennsylvania

Xian Gu

Durham University Business School

Jun "QJ" Qian

Fanhai International School of Finance, Fudan University; University of Pennsylvania - Wharton Financial Institutions Center

Linda Zhao

University of Pennsylvania - Statistics Department

Wu Zhu

University of Pennsylvania

Date Written: October 6, 2019

Abstract

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

Suggested Citation

Allen, Franklin and Cai, Junhui and Gu, Xian and Qian, Jun and Zhao, Linda and Zhu, Wu, Ownership Networks and Firm Growth: What Do Forty Million Companies Tell Us About the Chinese Economy? (October 6, 2019). Available at SSRN: https://ssrn.com/abstract=3465126 or http://dx.doi.org/10.2139/ssrn.3465126

Franklin Allen

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Junhui Cai

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Xian Gu (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Jun Qian

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States

HOME PAGE: http://fic.wharton.upenn.edu/fic/

Linda Zhao

University of Pennsylvania - Statistics Department ( email )

Wharton School
Philadelphia, PA 19104
United States

Wu Zhu

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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