GEP Research Paper 09/12
Finance and Firm Start-up Size: Quantile Regression Evidence from China
Jun Du and Sourafel Girma
Summary
Access to formal financing channels has beneficial effects on the size of start-up companies in China. By contrast, there is a negative relationship between informal finance and entry size.
Abstract
Using a unique dataset which provides information on the financial structure of start-up companies in the Chinese manufacturing industry, this paper documents robust evidence that access to formal financing channels has beneficial effects on firm size, these effects being more marked as we move up the entry size distribution. By contrast we find negative relationships between informal finance and entry size across all size quantiles. Given the well-documented positive correlations between firm size and numerous performance indicators, this paper has therefore uncovered entry size as an additional channel through which financial development promotes growth.
Issued in June 2009
This paper is available in PDF format