Liquidity Shock, Credit Constraint and the Development of Private vs. State-Owned Enterprises

Qing Shi, Chen Wang and Wei Wang ()
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Qing Shi: School of Economics, Shanghai University, Shanghai 200444, China
Chen Wang: Institute of Finance and Economics Research, Shanghai University of Finance and Economics, Shanghai 200433, China
Wei Wang: School of Public Economics and Administration, and Shanghai Key Laboratory of Financial Information Technology, Shanghai University of Finance and Economics, Shanghai 200433, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2019, vol. 14, issue 4, 583-603

Abstract: Based on firm level data for the period of 1998–2007, this paper attempts to explain the growth differences between private enterprises and state-owned enterprises (SOEs) in China, in the context of liquidity shocks, and institutional and financial environments. It is found that (1) when liquidity tightens, the private enterprises face stricter credit constraints than SOEs, which restricts the development of private enterprise; (2) when liquidity becomes abundant, private enterprises face fewer financial limitations and grow much faster than SOEs; (3) the effect of liquidity shocks on the growth rate gap between private enterprises and SOEs has weakened during the period 2002–2007. These findings reveal that the credit discrimination against private enterprises can be mitigated by improving institutional and financial environments, which weaken the effects of liquidity shocks on firm growth.

Keywords: liquidity shocks; credit constraint; state-owned enterprises (SOEs); private enterprises (search for similar items in EconPapers)
JEL-codes: D22 E51 O16 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:14:y:2019:i:4:p:583-603

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