Bank Financing in China's Private Sector: The Payoffs of Political Capital
AbstractSummary In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that entrepreneurs actively invest in political capital to overcome bank financing obstacles. Pursuing membership in the legislative or semi-legislative organs of the Chinese government is an effective strategy for private entrepreneurs to obtain political capital. Empirical analysis suggests that a legislative membership helps entrepreneurs get access to bank loans; and it may be more useful for small and medium enterprises.
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Bibliographic InfoArticle provided by Elsevier in its journal World Development.
Volume (Year): 37 (2009)
Issue (Month): 4 (April)
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Web page: http://www.elsevier.com/locate/worlddev
Asia bank financing China entrepreneur legal and regulatory constraints political capital;
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