The Impact Of Financial Liberalization On Listed Firms' Investment Finance In China

This paper collects the unbalanced panel data of 633 listed firms in China between 1992 and 2005 and uses the GMM(Generalized Method of Moments) to analyze the changing investment behavior. A Financial Liberalization Index (FLI) is then constructed and introduced to estimate whether financial liberalization in China has reduced the financial constraints on firms in China. The estimation results show a positive effect of financial reform on the relaxation of firm's external financial constraints in general, and the positive effects vary between state-owned and non-state-owned firms, and between large and small firms.