Ownership Networks and Firm Growth: What Do Forty Million Companies Tell Us About the Chinese Economy?

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