GOVERNMENT INTERVENTION AND FINANCIAL ACCESS: EVIDENCE FROM CHINA

This paper distinguishes between different forms of government intervention in a micro economy, including a firm’s tax burden, regulatory stringency, state shares and collective shares. The author offers a first attempt to explore how these types of government intervention affect a firm’s financial access. With evidence from China, he uses the 2005 World Bank Investor Climate survey data to confirm that a firm’s financial access is promoted by its tax burden and regulatory stringency but constrained by its state shares and collective shares. His estimates are robust to the potential endogeneity issue, the different measures of financial access and different samples. Given that most governments explicitly or implicitly dictate financial resources, this paper offers general applications for government policies or corporate finance.