Abstract
Yuanyuan Ma: This paper examines the profound issue of how political forces affect the economic market by investigating the favoritism toward state-owned firms in China. Assuming that “credit availability” is a good indirect indicator of state favoritism, the authors attempt to test whether being a state-owned firm is associated with higher credit availability and how this relationship changes over time and across different levels of government affiliations. Based on the stochastic frontier analysis of published balance sheet data of Chinese-listed firms during the period 2003–11, the authors conclude that there has been increased favoritism in credit availability toward state-owned firms and that the difference between central and local state-owned firms has gradually diminished to insignificance, revealing a continuing push toward state capitalism and a further strengthening of the economic role of local governments.
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