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The financing and growth of firms in China and India : evidence from capital markets

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  • Didier, Tatiana
  • Schmukler, Sergio L.

Abstract

This paper studies the extent to which firms in China and India use capital markets to obtain financing and grow. Using a unique data set on domestic and international capital raising activity and firm performance, it finds that the expansion of financial market activity since the 1990s has been more limited than what the aggregate figures suggest. Relatively few firms raise capital. Even fewer firms capture the bulk of the financing. Moreover, firms that issue equity or bonds are different and behave differently from other publicly listed firms. Among other things, they are typically larger and grow faster. The differences between users and non-users exist before the capital raising activity, are associated with the probability of raising capital, and become more accentuated afterward. The distribution of issuing firms shifts more over time than the distribution of those that do not issue, suggesting little convergence in firm size among listed firms.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6401.

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Date of creation: 01 Apr 2013
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Handle: RePEc:wbk:wbrwps:6401

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Keywords: Debt Markets; Microfinance; Economic Theory&Research; Access to Finance; Banks&Banking Reform;

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Cited by:
  1. Tatiana Didier & Ross Levine & Sergio L. Schmukler, 2014. "Capital Market Financing, Firm Growth, Firm Size Distribution," NBER Working Papers 20336, National Bureau of Economic Research, Inc.
  2. Sergio Schmukler & Tatiana Didier, 2013. "The Financing and Growth of Firms in China and India: Evidence from Capital Markets," 2013 Meeting Papers, Society for Economic Dynamics 98, Society for Economic Dynamics.
  3. Didier, Tatiana & Schmukler, Sergio L., 2014. "Financial development in Asia : beyond aggregate indicators," Policy Research Working Paper Series 6761, The World Bank.

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