Academia de Studii Economice Bucuresti

Amfiteatru Economic
AN ECONOMIC AND BUSINESS RESEARCH PERIODICAL
Facultatea de Business si Turism

Government-Enterprise Relation, Financing Plight and Enterprise Growth: Empirical Evidence from World Bank on Chinese Firms

Author:Zijian Li

JEL:G38, O17, D22

DOI:10.24818/EA/2022/59/214

Keywords:government-enterprise relation, financing plight, enterprise growth, mediating effect model.

Abstract:
Theoretically, the influence of government-enterprise relation on enterprise growth is divided into lubricating effect and friction effect. However, the government-enterprise relation has been discussed in only a few studies from the perspectives of enterprise financing and willingness. No unified conclusions have been formed regarding the influential consequences of government-enterprise relation. To investigate the influence mechanism of government-enterprise relation on enterprise growth, World Bank Survey of Chinese Enterprises data in 2012 was used in this study to empirically verify how the government-enterprise relation influenced enterprise growth, the mediating effect of financing plight via mediating effect models. The differentiated influences of government-enterprise relation on enterprise growth were explored through the grouping test of corporate ownership and scale. Moreover, the causal relation between government-enterprise relation and enterprise growth (the former facilitated the latter) was further tested and recognized through the instrumental variable method. Results show that the government-enterprise relation is capable of boosting enterprise growth by mitigating the financing plight faced by enterprises, thus proving the lubricating effect of government-enterprise relation. The findings still hold after the endogeneity problem is weakened by using the instrumental variable method and after the robustness test. In the grouping test, a good government-enterprise relation can promote the growth of private enterprises and small-sized enterprises by remitting the financing plight they face. The conclusions obtained from this study can provide a beneficial reference for expanding enterprise financing channels and constructing a complete financial system, and lay a theoretical foundation for probing the influences of government-enterprise relation.
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