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The Squeezed Middle: Political Affiliation and Financial Constraints in China

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  • Puyang Sun
  • Wei Jiang

Abstract

We examine the heterogeneous effects of political affiliation with the different levels of government on private Chinese firms’ financial constraints between 1998 and 2007 with Euler’s equation. Our results provide limited support for the positive effect of political affiliation on the firms’ external finance. Furthermore, we find that affiliating with the below-province-level governments might harden the external finance constraints of private firms when compared to the firms with no political affiliation. Moreover, political affiliation would not ease the private firms’ financial constraints in either capital- or labor-intensive industries.

Suggested Citation

  • Puyang Sun & Wei Jiang, 2015. "The Squeezed Middle: Political Affiliation and Financial Constraints in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1074-1083, November.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:6:p:1074-1083
    DOI: 10.1080/1540496X.2015.1080493
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    Cited by:

    1. Jingyu Gao & Adi Masli & Ikseon Suh & Jingchang Xu, 2021. "The Influence of a Family Business Climate and CEO–CFO Relationship Quality on Misreporting Conduct," Journal of Business Ethics, Springer, vol. 171(1), pages 99-122, June.
    2. Peisen Liu & Shoujun Huang & Houjian Li, 2018. "Bank Concentration and Firms' Debt Structure: Evidence from China," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 213-227, May.
    3. Ka Zeng & Yue Lu & Ya‐wei Li, 2021. "Trade agreements and Global Value Chain (GVC) participation: Evidence from Chinese industries," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 533-582, November.

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