Ayyagari, MeghanaDemirgüç-Kunt, AsliMaksimovic, Vojislav2012-05-252012-05-252008-01https://hdl.handle.net/10986/6462China is often mentioned as a counterexample to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China's growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.CC BY 3.0 IGOACCESS TO BANK LOANACCESS TO BANK LOANSACCESS TO CAPITALACCESS TO CREDITACCESS TO FINANCEACCESS TO FORMAL FINANCEACCOUNTINGADDITIONAL FINANCINGAGRICULTURE BANKALLOCATION OF CREDITALTERNATIVE FINANCINGAPPLICATION PROCEDURESAVAILABILITY OF FINANCEAVERAGE GROWTHBACK-ALLEY BANKINGBALANCE SHEETBANK ACCESSBANK COMPETITIONBANK DEPOSITSBANK FINANCINGBANK FUNDINGBANK LENDINGBANK LOANBANK LOANSBANK OFFICERSBANK OFFICIALSBANKING SECTORBANKING SYSTEMBONDBOND MARKETBOND MARKETSBORROWERBRIBINGBROKERSBUSINESS ACTIVITYBUSINESS ANGELSBUSINESS DEPARTMENTCAPITAL ACCUMULATIONCAPITAL LOANSCAPITAL MARKETSCAPITAL REQUIREMENTSCAPITAL STRUCTURECAPITALIZATIONCASH FLOWCHECKSCOLLATERALCOLLATERAL REQUIREMENTCOLLATERAL REQUIREMENTSCOMMERCIAL BANKCOMMERCIAL BANKSCONSUMERCONTRACTUAL OBLIGATIONSCONTRIBUTIONCORPORATE BONDCORPORATE FINANCECORRUPTIONCREDIT CARDCREDIT COOPERATIVESCREDIT HISTORIESCREDIT MARKETSCREDIT RATINGCREDIT RATING AGENCIESCREDIT RATINGSDEBTDEVELOPING COUNTRIESDIRECTED CREDITDIVERSIFICATIONDIVERSIFICATION STRATEGYEARNINGSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMICSECONOMIES IN TRANSITIONEDUCATION LEVELEDUCATIONAL LEVELEMERGING MARKETSEMPLOYEEEMPLOYMENTENDOWMENTSENFORCEMENT MECHANISMSENTREPRENEURIAL VENTURESENTREPRENEURSENTREPRENEURSHIPEQUITY FINANCEEQUITY FINANCINGEQUITY MARKETSEXCLUSIONEXTERNAL FINANCEEXTERNAL FINANCINGFAMILY MEMBERSFINANCESFINANCIAL DEVELOPMENTFINANCIAL INSTITUTIONFINANCIAL INTERMEDIATIONFINANCIAL LIBERALIZATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL PERFORMANCEFINANCIAL STUDIESFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCING NEEDSFINANCING SOURCESFIXED ASSETFIXED ASSETSFOREIGN BANKSFOREIGN DIRECT INVESTMENTFOREIGN FIRMSFOREIGN INVESTMENTFORMAL BANKFORMAL BANKINGFORMAL BANKING SYSTEMFORMAL EDUCATIONFORMAL FINANCIAL INSTITUTIONSFORMAL FINANCIAL SECTORGOOD CREDITGOVERNMENT POLICYGROWTH OPPORTUNITIESHIGH INTEREST RATESHOUSEHOLDSINCOMEINCOME GROUPSINDICATORS OF ACCESSINDUSTRIAL ENTERPRISESINFORMAL BANKINFORMAL BANKSINFORMAL CREDITINFORMAL FINANCEINFORMAL FINANCIAL INSTITUTIONSINFORMAL FINANCINGINFORMAL LENDERSINFORMATION TECHNOLOGYINITIAL FUNDINGINSTITUTIONAL DEVELOPMENTINSTITUTIONAL INVESTORSINTEREST RATEINTEREST RATE CEILINGSINTERNAL FINANCEINTERNAL FINANCINGINTERNAL FUNDSINTERNATIONAL BANKINVESTMENT CLIMATEINVESTMENT CLIMATESINVESTMENT CORPORATIONSINVESTOR PROTECTIONLACK OF COLLATERALLARGE COMPANIESLARGE FIRMSLAWSLEGAL PROTECTIONLEGAL PROTECTIONSLEGAL SYSTEMLENDERLIMITED ACCESSLIMITED ACCESS TO BANKLINE OF CREDITLOAN APPLICATIONLOAN APPLICATIONSLOAN GUARANTEELOAN GUARANTEE PROGRAMLOAN GUARANTEE PROGRAMSLOAN OFFICERSLOAN PORTFOLIOSLOANS FROM FAMILYLOCAL BANKLOW INCOMEMARKET CAPITALIZATIONMARKETINGMEDIUM ENTERPRISESMINORITY SHAREHOLDERSMONEY LENDERMONEYLENDERMONEYLENDERSMORAL HAZARDOVERDRAFTPOSSESSIONPRIVATE ENTERPRISESPRIVATE ENTREPRENEURSPRIVATE PROPERTYPRIVATIZATIONPROBABILITIESPROBABILITYPRODUCTIVITYPROFITABILITYPROPERTY RIGHTSPUBLIC POLICYQUESTIONNAIREREAL ESTATEREGRESSION ANALYSISREINVESTMENTREINVESTMENT RATESREPAYMENTREPAYMENT CAPACITYRETAINED EARNINGSRETURNSRURAL CREDITSALESALESSALES GROWTHSECONDARY SCHOOLSELF-FINANCINGSMALL BORROWERSSMALL BUSINESSSMALL BUSINESS FINANCESMALL BUSINESS LENDINGSMALL ENTERPRISESSMALL FIRM FINANCESOCIAL CAPITALSOCIAL WELFARESOURCES OF FUNDSTART-UPSSTATE BANKSSTATE OWNED BANKSSTOCK MARKETSTOCK MARKETSTRADE CREDITTRANSITION ECONOMIESWAGESWORKING CAPITALWorld Bank10.1596/1813-9450-4465