Internal finance and growth: Microeconometric evidence on Chinese firms

Guariglia, Alessandra; Liu, Xiaoxuan; Song, Lina

doi:10.1016/j.jdeveco.2010.07.003

Cited by 362 publications

(267 citation statements)

References 41 publications

Supporting

Mentioning

245

Contrasting

Unclassified

Order By: Relevance

“…Cull et al (2009) conclude that access to trade credit did not play a significant role in explaining the puzzle. Guariglia et al (2011) demonstrate that the Chinese growth miracle was driven by the highly productive private firms, which were able to accumulate very high cash flows. According to their study, it is thanks to this abundant internal finance that Chinese private firms managed to finance their high growth rates despite their limited ability to obtain external finance.…”

Section: Introductionmentioning

confidence: 92%

“…It is therefore possible that, although they face severe financial constraints, Chinese firms are able to maintain high fixed investment and growth rates by effectively managing their working capital. In addition to the ability to accumulate high cash flows highlighted in Guariglia et al (2011), good working capital management may contribute to the explanation for the Chinese growth puzzle.The remainder of the paper is organized as follows. Section 2 provides some background about working capital management and its importance in the Chinese context.…”

mentioning

confidence: 99%

See 1 more Smart Citation

Investment and financing constraints in China: Does working capital management make a difference?

Ding

Guariglia

Knight

2013

Journal of Banking & Finance

Self Cite

286

106

View full text Add to dashboard Cite

The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. IntroductionIn the last three decades, the Chinese economy has been characterized by persistently high fixed investment rates and phenomenal growth rates (Song et al., 2010) 1 . Yet, considering that the Chinese financial system is poorly developed, this can been seen as a puzzle (Allen et al., 2005). Several authors have tried to find explanations for this puzzle. Among these, Ayaggari et al. (2010) focus on the role of informal finance, and conclude that it is not because of their access to informal financial sources that Chinese firms were able to grow, despite limited access to external finance. Cull et al. (2009) conclude that access to trade credit did not play a significant role in explaining the puzzle. Guariglia et al. (2011) demonstrate that the Chinese growth miracle was driven by the highly productive private firms, which were able to accumulate very high cash flows. According to their study, it is thanks to this abundant internal finance that Chinese private firms managed to finance their high growth rates despite their limited ability to obtain external finance.In this paper, we focus on investment in fixed capital, which is a significant determinant of growth, both generally (Bernanke and Gurkaynak, 2001;Bond and Schiantarelli, 2004) and in China Knight, 2009, 2010) 2 . Specifically, we explore the role played by working capital management in explaining why Chinese firms were able to invest at very high rates despite significant financing constraints. Working capital is defined as the difference between current assets and current liabilities, and is often taken to be a measure of liquidity. We chose to focus on working capital management -motivated by the observation that, over the period 2000-2007, the Chinese firms in our dataset were characterized by a very high average ratio of working capital to fixed capital (66.6%).Considering that working capital is highly reversible, and that firms can easily adjust it (Fazzari and Petersen, 1993;Carpenter et al., 1994), our aim is to investigate the extent to which, in the presence of fluctuations in cash flow, Chinese firms are able to adjust their working capital instead of their fixed capital investment, therefore alleviating the effects of cash flow shocks on the latter. Our analysis is related to Fazzari and Petersen (1993) who conduct a similar investigation on US firms, and find that these firms are indeed able to 1 According to our dataset, which is fully described in section 3, over the more recent period covering ...

show abstract

Section: Introductionmentioning

confidence: 92%

mentioning

confidence: 99%

Investment and financing constraints in China: Does working capital management make a difference?

Ding

Guariglia

Knight

2013

Journal of Banking & Finance

Self Cite

286

106

View full text Add to dashboard Cite

show abstract

“…Increasing availability of micro-data at the firm level allowed for a characterization of the key features of industrial dynamics in this country, highlighting the role of virtuous transformation and learning of domestic firms, the differential contribution of state-owned vs. private firms, also regarding access to finance and the role of innovation in survival and growth of Chinese firms (see Guariglia et al, 2011;Zhang and Mohnen, 2013).…”

Section: The Chinese Contextmentioning

confidence: 99%

Persistent high-growth firms in China’s manufacturing

Moschella

Tamagni

2018

Small Bus Econ

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Exploiting a representative panel covering the period of the China's miracle, we find that HG firms outperform other firms, showing higher productivity, higher profitability, larger investment intensity, higher sales from product innovation, lower interest expenses and lower leverage. HG firms are also relatively young, larger in size, more often exporters and more concentrated in non-State-controlled companies. Terms of use: Documents inHowever, regression analysis suggests that none of the indicators of structural characteristics and performance considered above displays any statistical association with the ability to persistently replicate high-growth over time. The results speak against the long-run effectiveness of policies supporting the creation and backing of high-growth firms.JEL codes: D22, D24, L26

show abstract

“…Perkembangan dalam produktiviti mempunyai pengaruh yang besar dalam mempengaruhi pertumbuhan berbanding pengumpulan modal atau buruh (Guariglia et al 2011). Akses kepada sumber kewangan bagi mendapatkan dana untuk pelaburan projek firma telah menjadi penentu kepada peningkatan produktiviti dan pertumbuhan firma.…”

Section: Kerangka Teoriunclassified