Financial Inclusion, Entry Barriers, and Entrepreneurship: Evidence from China

Zhaobin Fan and Ruohan Zhang
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Zhaobin Fan: Department of International Business, International Business School, Jinan University, Zhuhai 519070, China
Ruohan Zhang: Department of International Business, International Business School, Jinan University, Zhuhai 519070, China

Sustainability, 2017, vol. 9, issue 2, 1-21

Abstract: This paper aims at investigating the relationship between financial inclusion and the formation of entrepreneurs, both theoretically and empirically. We first construct a theoretical model to examine how the development of financial inclusion affects the formation of entrepreneurs. The model suggests that the development of financial inclusion can mitigate credit constraints on entrepreneurial activities by reducing information asymmetry in financial transactions, and in addition this effect is greater in industries with lower barriers to entry. Then, using data from 31 provinces and 19 industries in China during the period 2005–2014, we test the impact of financial inclusion on the formation of entrepreneurs. The estimation results confirm the positive effect of financial inclusion development on the formation of entrepreneurs, and indicate that this effect is heterogeneous across industries. Moreover, the development of financial inclusion is often beneficial to the formations of entrepreneurs in sectors with lower entry barriers.

Keywords: financial inclusion; entry barriers; entrepreneurship; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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