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Financial liberalization, financing constraints and political connection: evidence from Chinese firms

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  • Yan, Isabel K.
  • Chan, Kenneth S.
  • Dang, Vinh Q.T.

Abstract

This paper examines the impact of recent financial liberalization in China on the financing constraints of publicly-listed Chinese firms with and without politically-connected CEO/Chairman. Two continuous indices are used to measure the evolution and intensity of financial reforms: a financial liberalization index and a capital control index. The results indicate that while firms without politically-connected CEO/Chairman face significant financing constraints and politically-connected firms do not, financial liberalization has reduced the constraints for the former. Similarly, lower capital control in China’s equity market lessens credit constraints for non-connected firms. No statistically-significant impact is detected with regards to firms that have CEO/Chairman with powerful political background.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35223.

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Date of creation: Feb 2011
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Handle: RePEc:pra:mprapa:35223

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Keywords: Financial liberalization; investments; financing constraints; political connection; Chinese firms;

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