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Finance and Firm Start-up Size: Quantile Regression Evidence from China

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  • Jun Du
  • Sourafel Girma

Abstract

Using a unique dataset which provides information on the financial structure of start-up companies in the Chinese manufacturing industry, this paper documents robust evidence that access to formal financing channels has beneficial effects on firm size, these effects being more marked as we move up the entry size distribution. By contrast we find negative relationships between informal finance and entry size across all size quantiles. Given the well-documented positive correlations between firm size and numerous performance indicators, this paper has therefore uncovered entry size as an additional channel through which financial development promotes growth.

Suggested Citation

  • Jun Du & Sourafel Girma, "undated". "Finance and Firm Start-up Size: Quantile Regression Evidence from China," Discussion Papers 09/12, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:09/12
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    File URL: http://www.nottingham.ac.uk/gep/documents/papers/2009/09-12.pdf
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    References listed on IDEAS

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    1. 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.
    2. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    3. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    4. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
    5. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    6. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    7. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    8. Lin, Justin Yifu & Cai, Fang & Li, Zhou, 1998. "Competition, Policy Burdens, and State-Owned Enterprise Reform," American Economic Review, American Economic Association, vol. 88(2), pages 422-427, May.
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    Keywords

    China; finance; growth;

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