Informal or Formal Financing? Or Both? First Evidence on the Co-Funding of Chinese Firms
AbstractThe recent financial crisis has reopened the debate on the impact of informal and formal finance on firm growth in developing countries. Using unique survey data, we find that informal finance is associated with higher sales growth for small firms and lower sales growth for large firms. We identify a complementary effect between informal and formal finance for the sales growth of small firms, but not for large firms. Informal finance offers informational and monitoring advantages, while formal finance offers relatively inexpensive funds. Co-funding, i.e. the simultaneous use of formal and informal finance, is the optimal choice for small firms.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9519.
Date of creation: Jun 2013
Date of revision:
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Other versions of this item:
- Degryse, Hans & Lu, Liping & Ongena, Steven, 2013. "Informal or formal financing? Or both? First evidence on the co-funding of Chinese firms," BOFIT Discussion Papers 14/2013, Bank of Finland, Institute for Economies in Transition.
- Degryse, H.A. & Lu, L. & Ongena, S., 2013. "Informal or Formal Financing? Or Both? First Evidence on the Co-Funding of Chinese Firms," Discussion Paper 2013-034, Tilburg University, Center for Economic Research.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- P2 - Economic Systems - - Socialist Systems and Transition Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-28 (All new papers)
- NEP-IFN-2013-09-28 (International Finance)
- NEP-IUE-2013-09-28 (Informal & Underground Economics)
- NEP-MFD-2013-09-28 (Microfinance)
- NEP-SBM-2013-09-28 (Small Business Management)
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- Carmen Kislat & Lukas Menkhoff & Doris Neuberger, 2013.
"The Use of Collateral in Formal and Informal Lending,"
Kiel Working Papers
1879, Kiel Institute for the World Economy.
- Kislat, Carmen & Menkhoff, Lukas & Neuberger, Doris, 2013. "The use of collateral in formal and informal lending," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79765, Verein für Socialpolitik / German Economic Association.
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