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Does the Chinese Banking System Promote the Growth of Firms?

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Author Info
Panicaos Demetriades (University of Leicester)
Jun Du (Aston University)
Sourafel Girma (University of Nottingham)
Chenggang Xu (London School of Economics)

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Abstract

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

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Publisher Info
Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0036.

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Date of creation: Feb 2008
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Handle: RePEc:wef:wpaper:0036

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Related research
Keywords: Chinese banking system development; value added and TFP growth; panel dataset;

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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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  2. Genevieve Boyreau-Debray & Shang-Jin Wei, 2005. "Pitfalls of a State-Dominated Financial System: The Case of China," NBER Working Papers 11214, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September. [Downloadable!] (restricted)
  4. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," NBER Working Papers 13103, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Svetlana Andrianova & Panicos Demetriades & Anja Shortland, 2006. "Government Ownership of Banks, Institutions, and Financial Development," WEF Working Papers 0011, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]
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  6. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December. [Downloadable!] (restricted)
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  7. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 317-341, 04. [Downloadable!] (restricted)
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  8. Rousseau, Peter L. & Xiao, Sheng, 2007. "Banks, stock markets, and China's `great leap forward'," Emerging Markets Review, Elsevier, vol. 8(3), pages 206-217, September. [Downloadable!] (restricted)
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