Pdam
Asia Pac J Manag DOI 10.1007/s10490-012-9303-y
Alternative financing and private firm performance
Daphne W. Yiu & Jun Su & Yuehua Xu
# Springer Science+Business Media, LLC 2012
Abstract Why do private firms grow vibrantly in transition economies despite their limited access to formal financing? This study underscores the importance of informal financing in facilitating the growth of private firms in China. Drawing from the institutional economics argument, we posit that informal financing, in the form of underground financing and trade credit, substitutes formal financing in providing financial assistance and capital to private firms in China. We further posit that the effects of two kinds of informal financing vary across provinces with different levels of institutional development, and complement each other by supporting firms in different industries. We test our arguments with a sample of 284 private firms in 19 cities in China. The results generally support the value-added effects of alternative financing and its coexistence with formal financing. Our study contributes to the literature by highlighting informal financing as a void-filling institution in the capital markets in China. Keywords Alternative financing . Capital access . Private firms . China
This work was supported by the National Natural Science Foundation of China (grant no. 71102118), the Research Base and Science & Technology Innovation Platform of Beijing Municipal Commission of Education (Accounting-Based Investor Protection), Funding Project for Innovation of Science, Technology and Post-Graduate Education in Institutions of Higher Learning under the Jurisdiction of Beijing Municipality (PXM2012_014213_000064) and China Center for Venture Capital Research of Beijing Technology and Business University. D. W. Yiu : Y. Xu Department of Management, The Chinese University of Hong Kong, Shatin, Hong Kong D. W. Yiu e-mail: dyiu@cuhk.edu.hk Y. Xu e-mail: yuehua@baf.msmail.cuhk.edu.hk J.
Alternative financing and private firm performance
Daphne W. Yiu & Jun Su & Yuehua Xu
# Springer Science+Business Media, LLC 2012
Abstract Why do private firms grow vibrantly in transition economies despite their limited access to formal financing? This study underscores the importance of informal financing in facilitating the growth of private firms in China. Drawing from the institutional economics argument, we posit that informal financing, in the form of underground financing and trade credit, substitutes formal financing in providing financial assistance and capital to private firms in China. We further posit that the effects of two kinds of informal financing vary across provinces with different levels of institutional development, and complement each other by supporting firms in different industries. We test our arguments with a sample of 284 private firms in 19 cities in China. The results generally support the value-added effects of alternative financing and its coexistence with formal financing. Our study contributes to the literature by highlighting informal financing as a void-filling institution in the capital markets in China. Keywords Alternative financing . Capital access . Private firms . China
This work was supported by the National Natural Science Foundation of China (grant no. 71102118), the Research Base and Science & Technology Innovation Platform of Beijing Municipal Commission of Education (Accounting-Based Investor Protection), Funding Project for Innovation of Science, Technology and Post-Graduate Education in Institutions of Higher Learning under the Jurisdiction of Beijing Municipality (PXM2012_014213_000064) and China Center for Venture Capital Research of Beijing Technology and Business University. D. W. Yiu : Y. Xu Department of Management, The Chinese University of Hong Kong, Shatin, Hong Kong D. W. Yiu e-mail: dyiu@cuhk.edu.hk Y. Xu e-mail: yuehua@baf.msmail.cuhk.edu.hk J.