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Formal Versus Informal Finance : Evidence from China

The Review of financial studies, 2010-08 [Peer Reviewed Journal]

World Bank ;ISSN: 0893-9454 ;EISSN: 1465-7368 ;DOI: 10.1093/rfs/hhq030

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Title:
Formal Versus Informal Finance : Evidence from China
Author: Ayyagari, Meghana ; Demirguc-Kunt, Asli ; Maksimovic, Vojislav
Subjects: Banks ; Capital and Ownership Structure G320 ; Corporate Finance and Governance O160 ; Economic Development: Financial Markets ; Financial Risk and Risk Management ; Financing Policy ; Firm Performance: Size, Diversification, and Scope L250 ; Micro Finance Institutions ; Mortgages G210 ; Other Depository Institutions ; Saving and Capital Investment ; Socialist Institutions and Their Transitions: Financial Economics P340
Is Part Of: The Review of financial studies, 2010-08
Description: The fast growth of Chinese private sector firms is taken as evidence that informal finance can facilitate firm growth better than formal banks in developing countries. We examine firm financing patterns and growth using a database of twenty-four hundred Chinese firms. While a relatively small percentage of firms utilize bank loans, bank financing is associated with faster growth whereas informal financing is not. Controlling for selection, we find that firms with bank financing grow faster than similar firms without bank financing and that our results are not driven by bank corruption or the selection of firms that have accessed the formal financial system. Our findings question whether reputation and relationship-based financing are responsible for the performance of the fastest-growing firms in developing countries.
Language: English
Identifier: ISSN: 0893-9454
EISSN: 1465-7368
DOI: 10.1093/rfs/hhq030
Source: Open Knowledge Repository

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Formal Versus Informal Finance : Evidence from China

World Bank ;ISSN: 0893-9454 ;EISSN: 1465-7368 ;DOI: 10.1093/rfs/hhq030

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