State equity participation and financing constraints of private enterprises in China: Based on the competitive pressure perspective

This study examines the impact of state participation on the alleviation of financing constraints faced by private Chinese enterprises. The analysis is based on data collected from a sample of 2,256 private Chinese enterprises surveyed by the World Bank in 2011 and 2013, and a sample of 3,197 listed enterprises in China from 2009 to 2020. The empirical findings demonstrate that (1) State equity participation can effectively alleviate the financial constraints faced by enterprises, and its approach is to alleviate financing constraints by lessening the competitive pressure on mixed-equity enterprises. (2) Anxiety related to survival and development that arises from competitive pressures compels private enterprises to seek competitive advantages through new investments. Consequently, private enterprises’ demand for external capital has increased. However, the conversion of capital requirements into external financing applications has become increasingly challenging due to deficiencies in enterprises’ internal cognitive processes regarding financial information. (3) Heterogeneity analysis reveals that state equity participation has a more pronounced impact on alleviating the financing constraints faced by emerging, non-group, and non-listed enterprises.