Munich Personal RePEc Archive

The Impact of Economic Institutions on Finance Sector:Evidence from China

Li, Zhao (2019): The Impact of Economic Institutions on Finance Sector:Evidence from China.

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Abstract

This paper studies how economic institutions affect private firm sectors capital accumulation through finance sector and operation objectives of different ownership firms in socialist market economy with Chinese characteristics, which extended the neo-classical economic growth method. Based on above framework, this paper finds that economic institutions were the main factors affecting the efficiency of capital allocation between private sector and stated-owned sector. Compared with stated-owned sector, economic institutions lead private sector to a decrease in loans and government subsidies through finance sector, and an increase in its production costs. Our evidence suggests that private firms take efforts to improve economic institutions as a substitute for political capital.

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