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Financing of Physical and Intangible Capital Investments in China

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  • Go Yano
  • Maho Shiraishi

Abstract

We used firm-level micro panel data for industrial firms in China from 2000 to 2009, which were drawn from a novel database, to study their methods of financing physical and intangible capital investments. Regarding non-listed domestic firms, our findings were as follows: (1) trade credit finances physical capital investments. (2) The complementary relationship between internal and external sources of finance changes from that between cash flows and trade credit to that between cash flows and bank loans as investment risk increases. (3) However, firms forgo debt finance, including bank loans, and rely instead on internal cash flows for financing investments under exceedingly risky conditions, such as the financing of intangible capital investments by financially-constrained high-tech firms.

Suggested Citation

  • Go Yano & Maho Shiraishi, 2020. "Financing of Physical and Intangible Capital Investments in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(6), pages 1351-1376, May.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:6:p:1351-1376
    DOI: 10.1080/1540496X.2018.1562889
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    Cited by:

    1. Bahadir Karakoç, 2023. "Working Capital Management and Performance in Financially Dependent Firms: Evidence from Developing Asian Economies," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 9(1), pages 37-55.

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