Bank Financing in China's Private Sector: The Payoffs of Political Capital

Wubiao Zhou

World Development, 2009, vol. 37, issue 4, pages 787-799

Abstract: Summary In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that entrepreneurs actively invest in political capital to overcome bank financing obstacles. Pursuing membership in the legislative or semi-legislative organs of the Chinese government is an effective strategy for private entrepreneurs to obtain political capital. Empirical analysis suggests that a legislative membership helps entrepreneurs get access to bank loans; and it may be more useful for small and medium enterprises.

Keywords: Asia; bank; financing; China; entrepreneur; legal; and; regulatory; constraints; political; capital (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VC6 ... 25aa9b7a21d09d5c59e2
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:wdevel:v:37:y:2009:i:4:p:787-799

Access Statistics for this article

World Development is edited by O. T. Coomes

More articles in World Development from Elsevier
Series data maintained by Heidi Boesdal ().