How do Cultural Values Affect the Entrepreneurial Financing of Farmers? Evidence from the “Thousand-Village Survey in China ” of SUFE

Abstract

The data used in this study come from the “Thousand-Village Survey in China” conducted by Shanghai University of Finance and Economics (SUFE) in 2016, aiming to investigate the “Current Situation of Rural Entrepreneurship in China”. We find that:（1）Rural entrepreneurs with traditional values or modern values tend to have internal financing, and the marginal effect of modern values on internal financing is greater.（2）Rural entrepreneurs with modern values tend to have formal external financing.（3）The positive impact of traditional values on internal financing may be weakened by institutional trust, while the positive impact of modern values on external financing may be strengthened by institutional trust. The findings of this study have several practical implications for rural entrepreneurs and policy-makers. Firstly, although farmers with modern values are accepted and diversity of cultural values is normal in modern society, family ties and social ties still impact on rural culture. Rural entrepreneurs should make rational use of family ties and social ties to obtain effective loans. Secondly, China has a bank-based financial system with an undeveloped capital market, where the majority of new businesses do not gain access to alternative equity sources, so policy-makers should consider developing private credit organization, formal financial institution and internet financing to advance modern financial system. Especially, if state-owned commercial banks with strong human capital or science and technology provide easy and good credits for rural entrepreneurs, the allocation of financial resources will be enhanced. In this situation, it may be preferable for rural entrepreneurs of small size and short life projects. Thirdly, from a more macroeconomic perspective, policy-makers should improve the rural financing guarantee system, allow the land use right and land contract management right to meet certain conditions to become collateral, improve the risk awareness of farmers in credit guarantee, and establish a credit system for rural entrepreneurs and enterprises. Lastly, traditional conservative ideas are particularly prominent in the rural areas of central and western China, so we should gradually change the consciousness of petty farmers and seek innovation in the financing system. This study makes two contributions to the entrepreneurial financing research. On the one hand, according to the social cognition theory, individual behavior, environment, cognition and the interaction of the three elements determinate social activity（Bandura, 1986）. Drawing on the social cognition theory, this study considers how the combination of cultural values and institutional trust affects rural entrepreneurial financing in a single framework. On the other hand, combined with the changes of farmers’ values, this study analyzes the differences between traditional values or modern values on the entrepreneurial financing of farmers.