Financial liberalization and financing constraints: some evidence from panel data of listed 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 and investment of publicly-listed Chinese firms. Two continuous indices are constructed to measure the evolution and intensity of financial reforms: a financial liberalization index and a capital control index. Dynamic panel GMM method is used to estimate firms’ financing constraints in an Euler-equation investment model. The results indicate that while smaller firms face significant financing constraints than larger firms, financial liberalization has raised the financing constraints for the latter and failed to relieve the constraints for the former. It appears financial reforms in China have subjected larger firms to greater market discipline but the reforms probably have not been profound enough to benefit smaller firms.

Keywords: Financial liberalization; investments; financing constraints; Chinese firms (search for similar items in EconPapers)
JEL-codes: E22 G18 G31 O16 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-tra
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Citations: View citations in EconPapers (1)

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