The choice of formal or informal finance: Evidence from Chengdu, China

Guibin Zhang

China Economic Review, 2008, vol. 19, issue 4, 659-678

Abstract: China's economic development since 1978 has been fuelled largely by a new private sector which is supported by both formal and informal financing channels. Although there is still a debate on the role of alternative financing mechanisms, the existence of such practices in China is accepted in the literature. This paper looks into the socio-economic patterns of private entrepreneurs regarding the choice of formal or informal finance, using survey data from Chengdu, China. Both the logit and ordered logit model are employed to examine the hypothesised factors. The results show that reputation and relationships play important roles in formal financing of the small private firms in China.

Keywords: C42; E26; O17; R51; Informal; economy; Formal; and; informal; sectors; Private; businesses; in; China; Informal; finance (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:19:y:2008:i:4:p:659-678

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