Week 8/9/10: The Corporate Sector Flashcards
(48 cards)
What does usual macro data suggest about economic growth?
There’s a positive relationship between broad measures of financial development and economic growth
According to Allen et al (2005), what is the Chinese Puzzle?
In spite of a malfunctioning financial system, China has one of the fastest growing economies
What does Allen et al (2011) find?
-Fast -growing economies with a weak legal system, non-bank finance plays an important role in financing growth through private credit agencies and underground private money houses
What is the average asset growth rate of Chinese firms between 2000-2007/
8.6%
What does Ayyagari et al (2010) find?
It is finance from the formal financial system that is associated with faster firm-level growth
What does cull et al (2009) find?
Trade credit did not play a significant role in explaining China’s growth
What studies look at the links between investment and financial variables?
Chow and Fung (1998,2000)
Hericourt and Poncet (2009)
Poncet et al (2009)
They find evidence that private firms are the most affected by financing constraints
How many firms from the Chinese National Bureau of Statistics are included in the analysis?
79,841
What sector are the firms in the analysis in?
Manufacturing and Mining
How do SOEs differ from other enterprises?
They are typically larger and exhibit lower cash flow and asset growth and lower productivity
What does data suggest about how firms are affected by availabilty of cash flow for growth?
-SOEs are not affected by cash flow
-Private and foreign firms are affected by cash flow
What firms have statistically significant assets growth to cash flow sensitivities?
-Firms on coastal regions
-Firms with state ownership less than 10%
-Firms with no affiliation with govt
What can we suggest about heterogeneity with private firms?
Not all private firms suffer the same degree of financial constraints
What is CFS?
Firm-level sensitivity of assets growth to cash flow
What can we conclude about the growth of Chinese SOEs?
They are no affected by availability of cash flow
Explain how cash flow affects private firms
High growth rate => High cash flow => high cash flow sensitivities => internal funds to enable growth despite constraints
What are the policy implications of financial constraints?
More widespread access to institutional finance to ensure that if private firms lose competitive advantage financial contraints don’t become widespread
What literature do we use to analyse the role of social capital?
Du et al. (2015)
What literature do we use to analyse the role of internal finance?
Guariglia et al (2011)
What is an SME
Small/Medium sized Enterprise
What is the motivation of Du et al (2015)
Analyse the ability of SMEs to acquire financial capital
What % of employment do SMEs account for?
75%
What % of bank loans do SMEs recieve?
<20%
Why is social capital important in emerging economies?
It facilitates information exchange, inter-firm collaboration and knowledge transfer
