Source of Finance

In: Business and Management

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Words 11124
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Research Paper No. 2009/03 Source of Finance, Growth and Firm Size – Evidence from China Jun Du1 and Sourafel Girma2
January 2009

Abstract Using a comprehensive firm-level dataset spanning the period 1998-2005, this paper provides a thorough investigation of the relationship between firm size, total factor productivity growth and financial structure in China, controlling for the endogeneity of the latter. Generally, it finds financing source matters for firms of different size, and the extent to which financing source matters for firm growth is greater for small firms than big firms. Self-raised finance appears to be most effective in promoting small firms to grow, and bank loan seems to be more supportive to big firms. The relationship between size, finance and growth also depends on ownership. In addition, there exist strong complementarities between formal and informal finance, as well as between indigenous and foreign finance. Keywords: China, finance, firm size, growth JEL classification: O5, G2, L11, L25, O1

Copyright © UNU-WIDER 2009
1 Aston

University, UK, e-mail: j.du@aston.ac.uk; 2 Nottingham University Business School, UK, e-mail: Sourafel.Girma@nottingham.ac.uk This study has been prepared within the UNU-WIDER project on Southern Engines of Global Growth, co-directed by Amelia U. Santos-Paulino and Guanghua Wan. UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Norway (Royal Ministry of Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development). ISSN 1810-2611 ISBN 978-92-9230-172-9

Tables and figure are at the end of the paper.

The World Institute for Development Economics Research (WIDER) was…...

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