Ownership Structure, Lending Bias, and Liquidity Constraints: Evidence from Shanghai's Manufacturing Sector

Chow, Clement Kong Wing; Fung, Michael Ka Yiu

doi:10.1006/jcec.1998.1527

Cited by 55 publications

(21 citation statements)

References 16 publications

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“…According to Hubbard (1998) and Cleary et al (2007), fewer financial constraints will flatten the U-shaped curve as a firm becomes less reliant on internally generated cash flows. In fact, some Chinese studies using data from unlisted firms in earlier periods have concluded that soft budget constraints have enabled state controlled firms to invest regardless of their cash flows (Chow and Fung, 1998;Guariglia et al, 2011;Héricourt and Poncet, 2009;Poncet et al, 2010). Whether soft budget constraints are relevant for listed firms in China is an empirical question that we address in this paper.…”

Section: Government Ownership and The Investment-cash Flow Relationmentioning

confidence: 94%

“…This result is in sharp contrast to the findings reported in previous studies on Chinese firms. An early study by Chow and Fung (1998), based on a manufacturing sample of 5325 firms in Shanghai during 1989-1992, concludes that investments made by private enterprises are significantly more sensitive to cash flow than those made by state-owned enterprises. Héricourt and Poncet (2009) investigate 1300 Chinese firms over the period 2000-2002 and find that investments made by private firms are sensitive to cash flow, but investments made by stateowned firms are not.…”

Section: Assets Sales/kmentioning

confidence: 98%

See 1 more Smart Citation

Corporate investment, government control, and financing channels: Evidence from China's Listed Companies

Firth¹,

Malatesta

Xin³

et al. 2012

Journal of Corporate Finance

155

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Section: Government Ownership and The Investment-cash Flow Relationmentioning

confidence: 94%

Section: Assets Sales/kmentioning

confidence: 98%

Corporate investment, government control, and financing channels: Evidence from China's Listed Companies

Firth¹,

Malatesta

Xin³

et al. 2012

Journal of Corporate Finance

155

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“…Within the first group, Ayyagari et al (2008) and Cull et al (2007) Among the second group of papers, Chow and Fung (1998) study the relationship between investment and cash flow using a panel of 5825 manufacturing firms operating in Shanghai over the period [1989][1990][1991][1992], with the objective of testing the financing constraints hypothesis. They find that firms' investment is constrained by cash flow, and that the sensitivity of investment to cash flow is highest for private firms and lowest for foreign owned firms.…”

Section: A Micro Perspectivementioning

confidence: 99%

“…State owned and collective firms also exhibit positive sensitivities, higher for the former. Chow and Fung (2000) exploit the same data set as Chow and Fung (1998) and, focusing once again on investment equations, show that small firms exhibit lower sensitivities of investment to cash flow than large firms. They explain this finding considering that small firms are dominated by non-state, fast growing enterprises, which may be using their working capital to smooth their fixed investment.…”

Section: A Micro Perspectivementioning

confidence: 99%

Internal finance and growth: Microeconometric evidence on Chinese firms

Guariglia

Liu

Song

2011

Journal of Development Economics

348

222

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Internal Finance and Growth: Microeconometric Evidence on Chinese FirmsAlessandra Guariglia Xiaoxuan Liu Lina Song The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We estimate dynamic assets growth equations augmented with cash flow, and find that the growth of state owned enterprises is not affected by cash flow, while that of privately owned firms is most affected. Considering that they represent 62% of the observations in our sample and that, in spite of being typically discriminated against by financial institutions, private firms have experienced sensational growth rates, our results suggest that internal finance has fostered rather than constrained their growth.JEL Classification: D92

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“…However, the "policy lending" regime during this period in China (Park & Sehrt, 2001) may give rise to higher levels of debt having quite a differently effect. In China, higher leverage may imply the availability of state funding for corporate operations (Chow & Fung, 1998).…”

Section: Leveragementioning

confidence: 99%

Leverage, Profitability and the Ownership Structures of Listed Firms in China

Hovey

2007

SSRN Journal

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The relationship between leverage, profitability and a firm's ownership structure in China is investigated in this paper. It is an exploratory study based on all firms listed on the Shanghai and Shenzhen stock exchanges from 1999 to 2005. The results of the empirical analysis are reported in this paper.The most significant result is that foreign holdings are found to have a significant relationship with the leverage of listed firms in China. Whereas, somewhat unexpectedly, institutional ownership, through legal person holding companies, state ownership and private holdings are not found to have a significant relationship with the capital structure choices of firms in China. The results also suggest that some firm-specific factors that are relevant for explaining firm leverage generally referred to in studies in developed economies, such as profitability, growth opportunities, size and tax shields, are also relevant in China. The age of the firms and the industry t o which they principally belong also has significant bearing. Yet direct government grants and the use of an internationally renowned auditing firm do not show a significant relationship.

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Ownership Structure, Lending Bias, and Liquidity Constraints: Evidence from Shanghai's Manufacturing Sector

Cited by 55 publications

References 16 publications

Corporate investment, government control, and financing channels: Evidence from China's Listed Companies

Corporate investment, government control, and financing channels: Evidence from China's Listed Companies

Internal finance and growth: Microeconometric evidence on Chinese firms

Leverage, Profitability and the Ownership Structures of Listed Firms in China

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