Bank financing in China’s private sector : the payoffs of political capital
Date of Issue2009
School of Humanities and Social Sciences
In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that entrepreneurs actively invest in political capital to overcome bank financing obstacles. Pursuing membership in the legislative or semi-legislative organs of the Chinese government is an effective strategy for private entrepreneurs to obtain political capital. Empirical analysis suggests that a legislative membership helps entrepreneurs get access to bank loans; and it may be more useful for small and medium enterprises.
DRNTU::Social sciences::Economic development::China
© 2008 Elsevier. This is the author created version of a work that has been peer reviewed and accepted for publication by World Development, Elsevier. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [DOI: http://dx.doi.org/10.1016/j.worlddev.2008.07.011 ]