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Internal Finance and Growth: Microeconometric Evidence on Chinese Firms

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  • Guariglia, Alessandra

    ()
    (University of Nottingham)

  • Liu, Xiaoxuan

    (Chinese Academy of Social Sciences)

  • Song, Lina

    ()
    (University of Nottingham)

Abstract

Does the availability of internal finance constrain firm growth? Or does it foster it? To answer these questions, we use a panel of 407,096 Chinese firms over the period 2000−2005. We estimate dynamic assets growth equations augmented with cash flow, and find that the growth of state owned enterprises is not affected by cash flow, while that of privately owned firms is most affected. Considering that they represent 62% of the observations in our sample and that, in spite of being typically discriminated against by financial institutions, private firms have experienced sensational growth rates, our results suggest that internal finance has fostered rather than constrained their growth.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3808.

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Length: 38 pages
Date of creation: Oct 2008
Date of revision:
Publication status: published in: Journal of Development Economics, 2011, 96 (1), 79 - 94
Handle: RePEc:iza:izadps:dp3808

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Keywords: cash flow; financial constraints; assets growth;

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