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Liquidity Shock, Credit Constraint and the Development of Private vs. State-Owned Enterprises

Author

Listed:
  • Qing Shi

    (School of Economics, Shanghai University, Shanghai 200444, China)

  • Chen Wang

    (Institute of Finance and Economics Research, Shanghai University of Finance and Economics, Shanghai 200433, China)

  • Wei Wang

    (School of Public Economics and Administration, and Shanghai Key Laboratory of Financial Information Technology, Shanghai University of Finance and Economics, Shanghai 200433, China)

Abstract

Based on firm level data for the period of 1998–2007, this paper attempts to explain the growth differences between private enterprises and state-owned enterprises (SOEs) in China, in the context of liquidity shocks, and institutional and financial environments. It is found that (1) when liquidity tightens, the private enterprises face stricter credit constraints than SOEs, which restricts the development of private enterprise; (2) when liquidity becomes abundant, private enterprises face fewer financial limitations and grow much faster than SOEs; (3) the effect of liquidity shocks on the growth rate gap between private enterprises and SOEs has weakened during the period 2002–2007. These findings reveal that the credit discrimination against private enterprises can be mitigated by improving institutional and financial environments, which weaken the effects of liquidity shocks on firm growth.

Suggested Citation

  • Qing Shi & Chen Wang & Wei Wang, 2019. "Liquidity Shock, Credit Constraint and the Development of Private vs. State-Owned Enterprises," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 14(4), pages 583-603, December.
  • Handle: RePEc:fec:journl:v:14:y:2019:i:4:p:583-603
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-008-019-0023-5
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    Cited by:

    1. Yixuan Duan & Min Guo & Yixuan Huang, 2022. "Leverage of Local State-Owned Enterprises, Implicit Contingent Liabilities of Government and Economic Growth," Sustainability, MDPI, vol. 14(6), pages 1-23, March.

    More about this item

    Keywords

    liquidity shocks; credit constraint; state-owned enterprises (SOEs); private enterprises;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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