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Financial liberalization, financing constraints and political connection: evidence from Chinese firms

Author

Listed:
  • Yan, Isabel K.
  • Chan, Kenneth S.
  • Dang, Vinh Q.T.

Abstract

This paper examines the impact of recent financial liberalization in China on the financing constraints of publicly-listed Chinese firms with and without politically-connected CEO/Chairman. Two continuous indices are used to measure the evolution and intensity of financial reforms: a financial liberalization index and a capital control index. The results indicate that while firms without politically-connected CEO/Chairman face significant financing constraints and politically-connected firms do not, financial liberalization has reduced the constraints for the former. Similarly, lower capital control in China’s equity market lessens credit constraints for non-connected firms. No statistically-significant impact is detected with regards to firms that have CEO/Chairman with powerful political background.

Suggested Citation

  • Yan, Isabel K. & Chan, Kenneth S. & Dang, Vinh Q.T., 2011. "Financial liberalization, financing constraints and political connection: evidence from Chinese firms," MPRA Paper 35223, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35223
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    File URL: https://mpra.ub.uni-muenchen.de/35241/2/MPRA_paper_35241.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial liberalization; investments; financing constraints; political connection; Chinese firms;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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