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Does Financial Constraint Hinder Firm Growth?

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  • Chunyang Wang
  • Sujuan Zhao
  • Haitao Zheng
  • Yiyi Bai

Abstract

Financial constraint is a major obstacle for firm growth in emerging economies. Using a World Business Environment Survey (WEBS) dataset, we find that formal financing constraint hampers firm growth. Small firms suffer more than large ones from financial constraint, whereas there is no significant difference between state-owned enterprises (SOEs) and non-SOEs. Our results are robust when we use collateral constraint as an instrumental variable for formal financial constraint. We provide supporting evidence for the promulgation of financial liberalization, which can help alleviate financial constraint, enhance firm growth, and therefore improve economic resilience and prevent financial risks in an emerging economy such as China.

Suggested Citation

  • Chunyang Wang & Sujuan Zhao & Haitao Zheng & Yiyi Bai, 2022. "Does Financial Constraint Hinder Firm Growth?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(15), pages 4195-4206, December.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:15:p:4195-4206
    DOI: 10.1080/1540496X.2022.2069490
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    Cited by:

    1. Ruize Cai & Kyung Hwan Yun & Minho Kim, 2022. "Financing Constraints and Corporate Value in China: The Moderating Role of Multinationality and Ownership Type," Sustainability, MDPI, vol. 14(19), pages 1-22, September.
    2. Qiyue Zhang & Yanli Wang & Qian Chen, 2024. "How Does Green Bond Issuance Facilitate the Spillover Effect of Green Technology Innovation in Industry? Evidence from China," Sustainability, MDPI, vol. 16(17), pages 1-19, September.
    3. Mingyue Xie & Suning Zhao & Kun Lv, 2024. "The Impact of Green Finance and Financial Technology on Regional Green Energy Technological Innovation Based on the Dual Machine Learning and Spatial Econometric Models," Energies, MDPI, vol. 17(11), pages 1-27, May.

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