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What determines firms' credit to access in the absence of effective economic institutions: Evidence from China

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  • Fu, Tong

Abstract

The existing literature suggests that economic institutions determine the allocation of resources for economic growth. As an important counterexample, although China has one of the world's fastest-growing economies, its legal and financial systems are underdeveloped. With evidence from China, the author confirms that government intervention positively and causally determines firms' access to credit. He further provides evidence that government intervention enables firms' profit through facilitating access to credit. This evidence confirms that the mechanism of government intervention allows firms' access to credit and then enables the firms to obtain relatively large profit. Ultimately, this paper reveals that, in the absence of effective economic institutions, government intervention channels the allocation of capital.

Suggested Citation

  • Fu, Tong, 2017. "What determines firms' credit to access in the absence of effective economic institutions: Evidence from China," Economics Discussion Papers 2017-35, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201735
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    Cited by:

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    2. Chien-Chi Chu & Sang-Bing Tsai & Yinghui Chen & Xiyang Li & Yuming Zhai & Quan Chen & Zeng Jing & Zeng-Zi Ju & Bin Li, 2017. "An Empirical Study on the Relationship between Investor Protection, Government Behavior, and Financial Development," Sustainability, MDPI, vol. 9(12), pages 1-14, November.
    3. Fu, Tong & Chang, Dongfeng & Miao, Chenglin, 2022. "Fuel regulation in a developing country: An interventional perspective," Energy Economics, Elsevier, vol. 113(C).
    4. Xu, Li & Zhang, Qin & Wang, Keying & Shi, Xunpeng, 2020. "Subsidies, loans, and companies' performance: evidence from China's photovoltaic industry," Applied Energy, Elsevier, vol. 260(C).
    5. Fu, Tong & Yang, Siying & Jian, Ze, 2022. "Government support for environmental regulation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    6. Ming Chen & Jiao Wu, 2023. "State ownership may not be bad: Based on bibliometric research (2002–2021)," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1285-1304, March.

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    More about this item

    Keywords

    access to credit; government intervention; mediation effect;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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