Internal finance and growth: Microeconometric evidence on Chinese firms

Alessandra Guariglia; Xiaoxuan Liu; Lina Song

doi:10.1016/j.jdeveco.2010.07.003

Internal finance and growth: Microeconometric evidence on Chinese firms

Alessandra Guariglia^*
, Xiaoxuan Liu
, Lina Song

^*Corresponding author for this work

Research output: Journal Publication › Article › peer-review

323 Citations (Scopus)

Abstract

Using a panel of 79,841 Chinese firms over the period 2000-2007, we examine the extent to which liquidity constraints affect firms' assets growth. We find that state owned enterprises are not affected, while the availability of internal finance represents a binding constraint for the growth of private firms, especially those operating in coastal regions, with negligible foreign ownership. Thanks to their high productivity, cash flow is, however, so abundant for these firms that they are able to grow at a very fast rate, despite being discriminated against by financial institutions. Hence, well developed external capital markets may not always be needed for fast economic growth.

Original language	English
Pages (from-to)	79-94
Number of pages	16
Journal	Journal of Development Economics
Volume	96
Issue number	1
DOIs	https://doi.org/10.1016/j.jdeveco.2010.07.003
Publication status	Published - Sept 2011
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Free Keywords

Assets growth
Cash flow
Financial constraints

ASJC Scopus subject areas

Development
Economics and Econometrics

Access to Document

10.1016/j.jdeveco.2010.07.003

Cite this

@article{3fb1b5678a414177bf47c7254086ae82,

title = "Internal finance and growth: Microeconometric evidence on Chinese firms",

abstract = "Using a panel of 79,841 Chinese firms over the period 2000-2007, we examine the extent to which liquidity constraints affect firms' assets growth. We find that state owned enterprises are not affected, while the availability of internal finance represents a binding constraint for the growth of private firms, especially those operating in coastal regions, with negligible foreign ownership. Thanks to their high productivity, cash flow is, however, so abundant for these firms that they are able to grow at a very fast rate, despite being discriminated against by financial institutions. Hence, well developed external capital markets may not always be needed for fast economic growth.",

keywords = "Assets growth, Cash flow, Financial constraints",

author = "Alessandra Guariglia and Xiaoxuan Liu and Lina Song",

note = "Funding Information: We thank three anonymous referees, E. Cannon, M. Chen, S. Fazzari, H. Kruiniger, B. Fleischer, M. Marchica, P. Mizen, R. Mura, L. Parisi, Y. Yao, and the participants to seminars at the Universities of Bath, Bristol, Durham, Manchester, and Newcastle; and to the 2007 workshop on the use of panel data in macroeconomics and finance organized by the Money, Macro and Finance Research Group, the 19th UK Chinese Economic Association Annual Conference, the “Microeconomic Drivers of Growth in China” Oxford Conference, and the “Post-Olympic China: Globalisation and Sustainable Development after three Decades of Reform” Nottingham Conference for helpful comments. A. Guariglia and L. Song gratefully acknowledge the financial support from the University of Nottingham Research on and in Asia Fund ASIA4246 , and from the Leverhulme Trust under Programme Grant F/00 114/AM . ",

year = "2011",

month = sep,

doi = "10.1016/j.jdeveco.2010.07.003",

language = "English",

volume = "96",

pages = "79--94",

journal = "Journal of Development Economics",

issn = "0304-3878",

publisher = "Elsevier B.V.",

number = "1",

}

TY - JOUR

T1 - Internal finance and growth

T2 - Microeconometric evidence on Chinese firms

AU - Guariglia, Alessandra

AU - Liu, Xiaoxuan

AU - Song, Lina

N1 - Funding Information: We thank three anonymous referees, E. Cannon, M. Chen, S. Fazzari, H. Kruiniger, B. Fleischer, M. Marchica, P. Mizen, R. Mura, L. Parisi, Y. Yao, and the participants to seminars at the Universities of Bath, Bristol, Durham, Manchester, and Newcastle; and to the 2007 workshop on the use of panel data in macroeconomics and finance organized by the Money, Macro and Finance Research Group, the 19th UK Chinese Economic Association Annual Conference, the “Microeconomic Drivers of Growth in China” Oxford Conference, and the “Post-Olympic China: Globalisation and Sustainable Development after three Decades of Reform” Nottingham Conference for helpful comments. A. Guariglia and L. Song gratefully acknowledge the financial support from the University of Nottingham Research on and in Asia Fund ASIA4246 , and from the Leverhulme Trust under Programme Grant F/00 114/AM .

PY - 2011/9

Y1 - 2011/9

N2 - Using a panel of 79,841 Chinese firms over the period 2000-2007, we examine the extent to which liquidity constraints affect firms' assets growth. We find that state owned enterprises are not affected, while the availability of internal finance represents a binding constraint for the growth of private firms, especially those operating in coastal regions, with negligible foreign ownership. Thanks to their high productivity, cash flow is, however, so abundant for these firms that they are able to grow at a very fast rate, despite being discriminated against by financial institutions. Hence, well developed external capital markets may not always be needed for fast economic growth.

AB - Using a panel of 79,841 Chinese firms over the period 2000-2007, we examine the extent to which liquidity constraints affect firms' assets growth. We find that state owned enterprises are not affected, while the availability of internal finance represents a binding constraint for the growth of private firms, especially those operating in coastal regions, with negligible foreign ownership. Thanks to their high productivity, cash flow is, however, so abundant for these firms that they are able to grow at a very fast rate, despite being discriminated against by financial institutions. Hence, well developed external capital markets may not always be needed for fast economic growth.

KW - Assets growth

KW - Cash flow

KW - Financial constraints

UR - https://www.scopus.com/pages/publications/79955987907

U2 - 10.1016/j.jdeveco.2010.07.003

DO - 10.1016/j.jdeveco.2010.07.003

M3 - Article

AN - SCOPUS:79955987907

SN - 0304-3878

VL - 96

SP - 79

EP - 94

JO - Journal of Development Economics

JF - Journal of Development Economics

IS - 1

ER -

Internal finance and growth: Microeconometric evidence on Chinese firms

Abstract

UN SDGs

Free Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this