Understanding informal financing
File(s)
Author(s)
Allen, HF
Qian, Meijun
Xie, Jing
Type
Journal Article
Abstract
This paper offers a framework to understand informal financing based on mechanisms to deal with asymmetric information and enforcement. We find that constructive informal financing such as trade credits and family borrowing that relies on information advantages or an altruistic relationship is associated with good firm performance. Underground financing such as money lenders who use violence for enforcement is not. Constructive informal financing is prevalent in regions where access to bank loans is extensive, while its role in supporting firm growth decreases with bank loan availability. International comparisons show that China is not an outlier but rather average in using informal financing.
Date Issued
2019-07-01
Date Acceptance
2018-02-28
Citation
Journal of Financial Intermediation, 2019, 39, pp.19-33
ISSN
1042-9573
Publisher
Elsevier
Start Page
19
End Page
33
Journal / Book Title
Journal of Financial Intermediation
Volume
39
Copyright Statement
© 2018 Elsevier Ltd. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence http://creativecommons.org/licenses/by-nc-nd/4.0/
Identifier
https://www.sciencedirect.com/science/article/pii/S1042957318300408?via%3Dihub
Subjects
Social Sciences
Business, Finance
Business & Economics
Informal financing
Asymmetric information
Social collateral
Firm growth
TRADE CREDIT
ECONOMICS
INSURANCE
Finance
1502 Banking, Finance and Investment
Publication Status
Published
Date Publish Online
2018-06-30