Government Connections and Financial Constraints : Evidence from a Large Representative Sample of Chinese Firms

Cull, Robert ; Li, Wei ; Sun, Bo ; Xu, Lixin Colin

World Bank, Washington, DC

关键词: ACCESS TO BANK;    ACCESS TO BANK LOANS;    ACCESS TO CREDIT;    ACCESS TO EXTERNAL FINANCE;    ACCESS TO FINANCE;   

DOI  :  10.1596/1813-9450-6352
RP-ID  :  WPS6352

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper examines the role offirms' government connections, defined by governmentintervention in the appointments of Chief Executive Officersand the status of state ownership, in determining theseverity of financial constraints faced by Chinese firms. Inline with the previous literature, the paper demonstratesthat investment by non-state firms is highly sensitive tointernal cash flows, while no such sensitivity is found forgovernment-owned enterprises. Even within the subset ofnon-state firms, government connections are associated withsubstantially less severe financial constraints (lessreliance on internal cash flows to fund investment). Thepaper also finds that large non-state firms with weakgovernment connections are especially financiallyconstrained, due perhaps to the formidable hold that theirstate rivals have on financial resources after the"grabbing-the-big-and-letting-go-the-small"privatization program in China. Firms withgovernment-appointed Chief Executive Officers also havesignificantly lower investment intensities, due perhaps totheir lower-powered incentives. The empirical resultssuggest that government connections play an important rolein explaining Chinese firms' investment behavior andfinancing conditions, and provide further evidence on thenature of the misallocation of credit by China'sdominant state-owned banks.