The financing and growth of firms in China and India: Evidence from capital markets |
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| Institution: | 1. Office of the Chief Economist for Latin America, The World Bank, 1818 H Street N.W., MSN I8-808, Washington, DC 20433, USA;2. Research Department, The World Bank, 1818 H Street N.W., MSN MC3-301, Washington, DC 20433, USA;1. Owen Graduate School of Management, Vanderbilt University, USA;2. Department of Economics, Santa Clara University, USA;1. School of Management, Lanzhou University, Lanzhou, China;2. Department of Accounting Finance and Economics, Griffith University, Brisbane, Australia;1. Visva-Bharati University, India;2. University of Bonn, Germany, and CEPR, London, UK;3. Xavier University, Bhubaneswar, India;1. Emeritus Professor of International Business and Finance, University of Akron, 7380 Sherman Rd, Chesterland, OH 44026, United States;2. College of Business Administration, University of Akron, Akron, OH 44325, United States |
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| Abstract: | This paper studies the extent to which firms in China and India use capital markets to obtain financing and grow. Using new data on domestic and international capital raising and firm performance, it finds that financial market activity has expanded less since the 1990s than aggregate figures suggest. Relatively few firms raise capital and even fewer attract most of the financing. Moreover, firms that issue equity or bonds are different and behave differently from other publicly listed firms. Among other things, they are typically larger and grow faster. The differences between users and nonusers exist before the capital raising, are associated with the probability of raising capital, and become more pronounced afterward. The size distribution of issuing firms shifts more over time than the distribution of those that do not issue, suggesting little convergence in size among listed firms. |
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| Keywords: | Access to finance Bond markets Capital market development Capital raising Firm dynamics Firm size distribution Stock markets F65 G00 G10 G31 G32 L25 |
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