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

Isabel K. Yan, Kenneth Chan and Vinh Q.T. Dang

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Financial liberalization; investments; financing constraints; political connection; Chinese firms (search for similar items in EconPapers)
JEL-codes: E22 G18 G31 O16 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-pol and nep-tra
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https://mpra.ub.uni-muenchen.de/35241/2/MPRA_paper_35241.pdf revised version (application/pdf)

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