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Using a novel, nationally representative data set on fraud victimization, this paper examines the impact of credit constraints on fraud victimization and potential underlying mechanisms in Chinese urban areas. After controlling for other household characteristics and regional fixed effects, households facing credit constraints are associated with 2.3 percentage points higher probability of becoming fraud victims, and have 20.4 percent higher subsequent economic losses from fraud when they are approached. The results are robust when dealing with the endogeneity of facing credit constraints and when addressing potential sample selection bias. Further analyses show that the personal discount rate (impatience) and the need for social network expansion are critical pathways via which credit constraints affect fraud victimization. The findings suggest that improving financial development is an effective way to reduce fraud victimization.

The serious implications of privatizing state-owned enterprises for politicians, managers, and investors make such decisions highly contingent on firm characteristics and past performance, complicating the identification of the privatization effects. A unique opportunity for this identification arises from a rule of promotion of local politicians based on age requirements in China. This paper finds that Chinese cities whose top officials were older than age 58 were 20 percent less likely to privatize local state-owned enterprises during the wave of state-owned enterprise restructuring starting in the late 1990s. Relying on the regression discontinuity design, the analysis finds that privatizations led to productivity gains of more than 170 percent, an order of magnitude larger than the traditional estimates based on the firm fixed effect specification (including its random-growth variant). The paper further finds that the privatization effects are significantly larger when the government is less involved in the affairs of local firms. The findings underscore the need to deal with the time-varying selectivity of privatizations and highlight the crucial role that state-owned enterprise privatizations played in China's economic takeoff.

We use data from a large survey of Chinese firms to investigate whether local government efforts to facilitate market development improve firm efficiency. Both government provision of information about products, markets, and innovation and government assistance in arranging loans are positively associated with firm efficiency, and those private firms with weak access to and knowledge of financial, input, and product markets benefit most from such assistance. These patterns are robust across multiple estimation approaches. Our examination of the determinants of local government facilitation also suggests that it gravitates toward promoting efficiency, though there are also indications that rent-seeking may play a role. Our evidence is consistent with the notion that government facilitation can help some firms overcome market failures in the early stages of a country's private sector development. Though causality is difficult to establish, we argue that changing fiscal dynamics that forced local governments to become increasingly self-reliant in generating revenue, and a government promotion system based on local economic performance, were key motivating factors for market facilitation by local government officials. (C) 2015 Published by Elsevier B.V.

Hayek argues that local knowledge is a key for understanding whether production should be decentralized. This paper tests Hayek’s predictions by examining the causes of the Chinese government’s decision to decentralize state-owned enterprises. Since the government located closer to a state-owned enterprise has more information over that enterprise, a greater distance between the government and the enterprise should lead to a higher likelihood of decentralization. Moreover, where communication costs and the government’s uncertainty over an enterprise’s performance are greater, the government is more likely to decentralize enterprises so that it can better utilize local information. This paper finds empirical support for these implications.

This paper studies the effects of voluntary accounting information disclosure through auditing on firm access to finance, exposure to corruption, and sales growth. Relying on a data set of more than 70,000 firms in 121 countries, the analysis finds that disclosure can be a double-edged sword. On the one hand, audited firms exhibit a slightly lower level of financial constraints than unaudited firms. On the other hand, audited firms face a significantly higher level of corruption obstacles. The net effects of voluntary information disclosure on firm growth are negative, which can largely be explained by the fact that most of the countries in the sample are developing countries where institutions are weak. The beneficial effect of disclosure increases as a country’s property rights protection improves. The qualitative results are robust to considerations of the endogeneity of auditing and to alternative measures of corruption and financial constraints. The findings reveal the dark side of voluntary information disclosure: exposing firms to government expropriation where institutions are weak.