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What determines firms' access to credit in the absence of effective economic institutions: Evidence from China

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  • Fu, Tong

Abstract

The existing literature suggests that economic institutions determine the allocation of resources for economic growth. As an important counterexample, although China has one of the world's fastest-growing economies, its legal and financial systems are underdeveloped. With evidence from China, the author confirms that government intervention positively and causally determines firms' access to credit. The author further provides evidence that government intervention enables firms' profit through facilitating access to credit. This evidence confirms that the mechanism of government intervention allows firms' access to credit and then enables the firms to obtain relatively large profits. Ultimately, this paper reveals that, in the absence of effective economic institutions, government intervention determines firms' access to credit.

Suggested Citation

  • Fu, Tong, 2017. "What determines firms' access to credit in the absence of effective economic institutions: Evidence from China," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-27.
    • Handle: RePEc:zbw:ifweej:201731
    DOI: 10.5018/economics-ejournal.ja.2017-31
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    Cited by:

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    More about this item

    Keywords

    access to credit; government intervention; mediation effect;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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