at 14.00​

Liping Lu, Tilburg University: Informal or Formal Financing? Or Both? First Evidence on the Co-Funding of Chinese Firms

The current financial crisis has reopened the debate on the impact of informal versus formal
finance on firm growth in developing countries. Using unique survey data we find that
informal finance in China is associated with higher sales growth for small firms, but lower
sales growth for large firms. Furthermore, we find a complementary effect between informal
and formal finance for the sales growth of small firms, but not for large firms. Co-funding
seems an optimal choice for small firms, with informal finance having the informational and
monitoring advantage and formal finance coming at a lower cost. Our findings therefore cast
doubts on existing government policies in developing countries that merely repress informal

Key Words: Informal Finance, Formal Finance, Co-funding, Sales Growth
JEL Codes: G21, G32, P2. 

BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms Liisa Mannila  (firstname.lastname@bof.fi, phone  + 358 10 831 2268).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).