Business, Management and Accounting
8 years ago

Foreign investment in China eases credit constraints for private firms.

SSRN Electronic Journal
FDI and Credit Constraints: Firm Level Evidence in China
Jérôme Héricourt, Sandra Poncet

Paper Summary

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Foreign investment in China helps private domestic firms access more financing, easing their credit constraints. Public firms, on the other hand, are not as affected by debt ratios or foreign firms' presence, suggesting they have a soft budget constraint. The study looked at data from 2,200 domestic companies from 1999-2002 to understand how different types of firms are impacted by credit constraints and foreign investment.