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Understanding Informal Financing

Allen, Franklin; Qian, Meijun; Xie, Jing

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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]

dc.contributor.authorAllen, Franklin
dc.contributor.authorQian, Meijun
dc.contributor.authorXie, Jing
dc.date.accessioned2020-10-15T23:02:18Z
dc.identifier.issn1042-9573
dc.identifier.urihttp://hdl.handle.net/1885/212519
dc.description.abstractThis 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
dc.format.mimetypeapplication/pdf
dc.language.isoen_AU
dc.publisherElsevier
dc.rights© 2018 Elsevier Inc
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/
dc.sourceJournal of Financial Intermediation
dc.titleUnderstanding Informal Financing
dc.typeJournal article
local.description.notesImported from ARIES
local.identifier.citationvolume39
dc.date.issued2019-07
local.identifier.absfor150203 - Financial Institutions (incl. Banking)
local.identifier.absfor150299 - Banking, Finance and Investment not elsewhere classified
local.identifier.absfor150303 - Corporate Governance and Stakeholder Engagement
local.identifier.ariespublicationu1027566xPUB101
local.publisher.urlhttps://www.elsevier.com/en-au
local.type.statusAccepted Version
local.contributor.affiliationAllen, Franklin, Imperial College
local.contributor.affiliationQian, Meijun, College of Business and Economics, ANU
local.contributor.affiliationXie, Jing, Hong Kong Polytechnic University
local.description.embargo2021-07-30
local.bibliographicCitation.startpage19
local.bibliographicCitation.lastpage33
local.identifier.doi10.1016/j.jfi.2018.06.004
dc.date.updated2020-07-06T08:18:54Z
local.identifier.scopusID2-s2.0-85049959109
dcterms.accessRightsOpen Access
dc.provenancehttps://v2.sherpa.ac.uk/id/publication/13927..."The Accepted Version can be archived in an Institutional Repository. 24 Months. CC BY-NC-ND." from SHERPA/RoMEO site (as at 16/10/2020).
dc.rights.licenseCC BY-NC-ND
CollectionsANU Research Publications

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