Bank financing in China’s private sector : the payoffs of political capital
In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that ent...
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| Format: | Article |
| Language: | English |
| Published: |
2012
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| Online Access: | https://hdl.handle.net/10356/94491 http://hdl.handle.net/10220/7499 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that entrepreneurs actively invest in political capital to overcome bank financing obstacles. Pursuing membership in the legislative or semi-legislative organs of the Chinese government is an effective strategy for private entrepreneurs to obtain political capital. Empirical analysis suggests that a legislative membership helps entrepreneurs get access to bank loans; and it may be more useful for small and medium enterprises. |
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