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The impact of local incentive-based legislation on the financing constraints of private firms–Evidence from China

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  • Tian, Qian
  • Zhu, Yan
  • Zhang, Zili

Abstract

This study selects A-share private firms in Zhejiang Province and its neighboring provinces in 2018–2021 and finds that private firms’ incentive-based legislation significantly alleviates private firms' financing constraints through a double difference model. The legislation alleviates the financing constraints of private firms by reducing the burden of financial liabilities, broadening financing channels such as operating liabilities, and enhancing debt servicing capacity. The effect of the private firm's incentive-based legislation on alleviating financing constraints is more pronounced in firms that are consistently private, have higher tax burdens, have lower competition in the industry, and do not have internal control deficiencies.

Suggested Citation

  • Tian, Qian & Zhu, Yan & Zhang, Zili, 2024. "The impact of local incentive-based legislation on the financing constraints of private firms–Evidence from China," Finance Research Letters, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010523
    DOI: 10.1016/j.frl.2024.106022
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