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Understanding Informal Financing

Allen, Franklin; Qian, Meijun; Xie, Jing


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...[Show more]

CollectionsANU Research Publications
Date published: 2019-07
Type: Journal article
Source: Journal of Financial Intermediation
DOI: 10.1016/j.jfi.2018.06.004
Access Rights: Open Access


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