Advertisement

Has financial development benefited the performance of publicly traded cultural and creative firms? Evidence from China

  • Yan LiEmail author
  • Md. Main Uddin
  • Ye An
Original Article
  • 95 Downloads

Abstract

Using data over the 2008–2015 period, we examine the impact of financial development on the performance of publicly traded cultural and creative firms in China. Our results show that financial development, especially credit market growth, is associated with the improved performance of publicly traded cultural and creative firms. We also find that financial development exhibits differential impacts across the regions in China. Amongst financing channels, bank loans in the eastern region and private lending in the central and western regions are more effective in promoting the performance of publicly traded cultural and creative firms. Consequently, our findings have significant policy implications for the funding and financing practices of both financiers and cultural and creative industries. Policy measures that foster financial product innovation, diversify financing channels and ease financial difficulties should be undertaken to achieve sustainable growth in the cultural and creative industries.

Keywords

Financial development Performance Financing channels Publicly traded cultural and creative firms China 

JEL Classification

G20 G32 Z10 

Notes

Acknowledgement

The authors thank Maximilian Sauerland from the Leipzig University and Ishan Khatri from the Prairie View A. & M. University, who were curious enough to want to read and comment on this paper. Yan Li particularly thanks China Scholarship Council for the generous financial support of this study carried out in Monash University, Australia.

Funding

This study was funded by China Scholarship Council (Grant number 201606620071).

Compliance with ethical standards

Conflict of interest

Author Yan Li has received research grant from China Scholarship Council.

References

  1. Allen, F., & Qian, J. (2014). China’s financial system and the law. Cornell International Law Journal, 47(3), 499–553.Google Scholar
  2. Allen, F., Qian, J. Q., & Gu, X. (2017). An overview of China’s financial system. Annual Review of Financial Economics, 9, 191–231.CrossRefGoogle Scholar
  3. Allen, F., Qian, J., & Qian, M. (2005). Law, finance, and economic growth in China. Journal of Financial Economics, 77(1), 57–116.CrossRefGoogle Scholar
  4. Allen, F., Qian, J., & Qian, M. (2007). China’s financial system: past, present, and future. Working paper, University of Pennsylvania.Google Scholar
  5. Ang, J. S., Cheng, Y., & Wu, C. (2014). Does enforcement of intellectual property rights matter in China? Evidence from financing and investment choices in the high-tech industry. Review of Economics and Statistics, 96(2), 332–348.CrossRefGoogle Scholar
  6. Angelini, P., & Generale, A. (2008). On the evolution of firm size distributions. The American Economic Review, 98(1), 426–438.CrossRefGoogle Scholar
  7. Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2010). Formal versus informal finance: Evidence from China. The Review of Financial Studies, 23(8), 3048–3097.CrossRefGoogle Scholar
  8. Ballantyne, A., Hambur, J., Roberts, I., & Wright, M. (2014). Financial reform in Australia and China. Retrieved April 18, 2018 from https://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-10.pdf.
  9. Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking & Finance, 30(11), 2931–2943.CrossRefGoogle Scholar
  10. Beck, T., Demirguc-Kunt, A., Laeven, L., & Levine, R. (2008a). Finance, firm size, and growth. Journal of Money, Credit and Banking, 40(7), 1379–1405.CrossRefGoogle Scholar
  11. Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2008b). Financing patterns around the world: Are small firms different? Journal of Financial Economics, 89(3), 467–487.CrossRefGoogle Scholar
  12. Borin, E., Donato, F., & Sinapi, C. (2018). Financial sustainability of small- and medium-sized enterprises in the cultural and creative sector: The role of funding. In E. Innerhofer, H. Pechlaner, & E. Borin (Eds.), Entrepreneurship in culture and creative industries (pp. 45–62). Cham: Springer.CrossRefGoogle Scholar
  13. Brown, J. R., Fazzari, S. M., & Petersen, B. C. (2009). Financing innovation and growth: Cash flow, external equity, and the 1990s R&D boom. The Journal of Finance, 64(1), 151–185.CrossRefGoogle Scholar
  14. Brown, J. L., MacDonald, R., & Mitchell, R. (2015). Are people who participate in cultural activities more satisfied with life? Social Indicators Research, 122(1), 135–146.CrossRefGoogle Scholar
  15. Carpenter, J. N., & Whitelaw, R. F. (2017). The development of China’s stock market and stakes for the global economy. Annual Review of Financial Economics, 9, 233–257.CrossRefGoogle Scholar
  16. China Daily. (2017). China issues five-year reform plan on cultural industry.Google Scholar
  17. Čihák, M., Demirgüč-Kunt, A., Feyen, E., & Levine, R. (2013). Financial development in 205 economies, 1960 to 2010. NBER working papers 18946. Retrieved April 20, 2018 from http://www.chinadaily.com.cn/business/2017-05/08/content_29248582.htm.
  18. Cong, L. W., Lee, C. M. C., Qu, Y., & Shen, T. (2018). Financing entrepreneurship and innovation in China: A public policy perspective. Retrieved April 20, 2019 from https://ssrn.com/abstract=3249278.
  19. Cowen, T. (2009). Good and plenty: The creative successes of American arts funding. New Jersey: Princeton University Press.CrossRefGoogle Scholar
  20. Cunningham, S. D. (2005). Creative enterprises. In J. Hartley (Ed.), Creative industries (pp. 282–298). New Jersey: Blackwell Publishing.Google Scholar
  21. Cunningham, S., Ryan, M. D., Keane, M., & Ordonez, D. (2008). Financing creative industries in developing countries. In D. Barrowclough & Z. Kozul-Wright (Eds.), Creative industries and developing countries: Voice, choice and economic growth (pp. 65–110). New York: Routledge.Google Scholar
  22. Démurger, S., Sachs, J. D., Woo, W. T., Bao, S., Chang, G., & Mellinger, A. (2002). Geography, economic policy, and regional development in China. Asian Economic Papers, 1(1), 146–197.CrossRefGoogle Scholar
  23. Didier, T., & Schmukler, S. L. (2013). The financing and growth of firms in China and India: evidence from capital markets. Journal of International Money and Finance, 39, 111–137.CrossRefGoogle Scholar
  24. Fleming, T. (2007). Investment and funding for creative enterprises in the UK. In C. Henry (Ed.), Entrepreneurship in the creative industries: An international perspective (pp. 107–125). Cheltenham: Edward Elgar.Google Scholar
  25. Florida, R. (2005). Cities and the creative class. New York: Routledge.CrossRefGoogle Scholar
  26. Fung, A. Y., & Erni, J. N. (2013). Cultural clusters and cultural industries in China. Inter-Asia Cultural Studies, 14(4), 644–656.CrossRefGoogle Scholar
  27. Galloway, S. (2006). Cultural participation and individual quality of life: A review of research findings. Applied Research in Quality of Life, 1(3–4), 323–342.Google Scholar
  28. Gill, R., & Pratt, A. (2008). In the social factory? Immaterial labour, precariousness and cultural work. Theory, Culture & Society, 25(7–8), 1–30.CrossRefGoogle Scholar
  29. Gregory, N., & Tenev, S. (2001). The financing of private enterprise in China. Finance and Development, 38(1), 14–17.Google Scholar
  30. Hahn, G., Kim, K., & Kwon, J. Y. (2017). Start-up financing with patent signaling under ambiguity. Asia-Pacific Journal of Financial Studies, 46(1), 32–63.CrossRefGoogle Scholar
  31. Hardin, C. (2017). The politics of finance: Cultural economy, cultural studies and the road ahead. Journal of Cultural Economy, 10(4), 325–338.CrossRefGoogle Scholar
  32. Hesmondhalgh, D. (2002). The cultural industries. London: Sage.Google Scholar
  33. Howell, S. T. (2017). Financing innovation: Evidence from R&D grants. The American Economic Review, 107(4), 1136–1164.CrossRefGoogle Scholar
  34. Howkins, J. (2001). The creative economy: How people make money from ideas. London: Penguin.Google Scholar
  35. Hsu, P. H., Tian, X., & Xu, Y. (2014). Financial development and innovation: Cross-country evidence. Journal of Financial Economics, 112(1), 116–135.CrossRefGoogle Scholar
  36. Hsu, P. H., Wang, C., & Wu, C. (2013). Banking systems, innovations, intellectual property protections, and financial markets: Evidence from China. Journal of Business Research, 66(12), 2390–2396.CrossRefGoogle Scholar
  37. Hubbard, R. G. (1998). Capital-market imperfections and investment. Journal of Economic Literature, 36(1), 193–225.Google Scholar
  38. Hui, D. (2006). From cultural to creative industries: Strategies for Chaoyang District, Beijing. International Journal of Cultural Studies, 9(3), 317–331.CrossRefGoogle Scholar
  39. Jiang, F., Jiang, Z., & Kim, K. A. (2017). Capital markets, financial institutions, and corporate finance in China. Journal of Corporate Finance.  https://doi.org/10.1016/j.jcorpfin.2017.12.001.CrossRefGoogle Scholar
  40. Kabanda, P. (2014). The creative wealth of nations: how the performing arts can advance development and human progress. Policy research working paper 7118.Google Scholar
  41. Keane, M. (2013). Creative industries in China: Art, design and media. Cambridge: Polity Press.Google Scholar
  42. Keane, M. (Ed.). (2016). Handbook of cultural and creative industries in China. Cheltenham: Edward Elgar Publishing.Google Scholar
  43. Keane, M., & Chen, Y. (2017). Entrepreneurial solutionism, characteristic cultural industries and the Chinese dream. International Journal of Cultural Policy, 1, 1–13.CrossRefGoogle Scholar
  44. Kerr, W. R., & Nanda, R. (2015). Financing innovation. Annual Review of Financial Economics, 7, 445–462.CrossRefGoogle Scholar
  45. King, R. G., & Levine, R. (1993). Finance, entrepreneurship and growth. Journal of Monetary economics, 32(3), 513–542.CrossRefGoogle Scholar
  46. Klamer, A. (2011). Cultural entrepreneurship. The Review of Austrian Economics, 24(2), 141–156.CrossRefGoogle Scholar
  47. Klamer, A. (2016). The value-based approach to cultural economics. Journal of Cultural Economics, 40(4), 365–373.CrossRefGoogle Scholar
  48. Konrad, E. D. (2015). Cultural entrepreneurship and money: Start-up financing structures in the creative industries. Problemy Zarzadzania, 13, 159–176.CrossRefGoogle Scholar
  49. Lazzeretti, L., & Vecco, M. (Eds.). (2018). Creative industries and entrepreneurship: Paradigms in transition from a global perspective. Northampton: Edward Elgar Publishing.Google Scholar
  50. Levine, R. (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature, 35(2), 688–726.Google Scholar
  51. Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. N. Durlauf (Eds.), Handbook of economic growth (pp. 865–934). Amsterdam: Elsevier.Google Scholar
  52. Liu, G., & Zhang, C. (2019). Economic policy uncertainty and firms’ investment and financing decisions in China. China Economic Review.  https://doi.org/10.1016/j.chieco.2019.02.007.CrossRefGoogle Scholar
  53. Love, I. (2003). Financial development and financing constraints: International evidence from the structural investment model. The Review of Financial Studies, 16(3), 765–791.CrossRefGoogle Scholar
  54. Markusen, A., Wassall, G. H., DeNatale, D., & Cohen, R. (2008). Defining the creative economy: Industry and occupational approaches. Economic Development Quarterly, 22(1), 24–45.CrossRefGoogle Scholar
  55. Mazzucato, M. (2013). Financing innovation: creative destruction vs. destructive creation. Industrial and Corporate Change, 22(4), 851–867.CrossRefGoogle Scholar
  56. Murphy, A. B. (2012). China’s cultural and creative economy: An introduction. Eurasian Geography and Economics, 53(2), 179–181.CrossRefGoogle Scholar
  57. Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.CrossRefGoogle Scholar
  58. O’Connor, J., & Gu, X. (2014). Creative industry clusters in Shanghai: a success story? International Journal of Cultural Policy, 20(1), 1–20.CrossRefGoogle Scholar
  59. Poncet, S., Steingress, W., & Vandenbussche, H. (2010). Financial constraints in China: Firm-level evidence. China Economic Review, 21(3), 411–422.CrossRefGoogle Scholar
  60. Porfírio, J. A., Carrilho, T., & Mónico, L. S. (2016). Entrepreneurship in different contexts in cultural and creative industries. Journal of Business Research, 69(11), 5117–5123.CrossRefGoogle Scholar
  61. Porta, R. L., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155.CrossRefGoogle Scholar
  62. Rajan, R. G., & Zingales, L. (1998). Financial dependence and growth. The American Economic Review, 88(3), 559–586.Google Scholar
  63. Robb, A. M., & Robinson, D. T. (2014). The capital structure decisions of new firms. The Review of Financial Studies, 27(1), 153–179.CrossRefGoogle Scholar
  64. Schuman, M. (2016). Venture Communism: How China is building a start-up boom. The New York Times. Retrieved May 18, 2018 from https://www.nytimes.com/2016/09/04/business/international/venture-communism-how-china-is-building-a-start-up-boom.html.
  65. Scott, A. J. (2004). Cultural-products industries and urban economic development: prospects for growth and market contestation in global context. Urban Affairs Review, 39(4), 461–490.CrossRefGoogle Scholar
  66. Scott, A. J. (2006). Entrepreneurship, innovation and industrial development: Geography and the creative field revisited. Small Business Economics, 26(1), 1–24.CrossRefGoogle Scholar
  67. Snowball, J., Collins, A., & Tarentaal, D. (2017). Transformation and job creation in the cultural and creative industries in South Africa. Cultural Trends, 26(4), 295–309.CrossRefGoogle Scholar
  68. Stein, J. C. (2003). Agency, information and corporate investment. In G. M. Onstantinides, M. Harris, & R. Stulz (Eds.), Handbook of the economics of finance: Corporate finance (pp. 111–165). Amsterdam: Elsevier.CrossRefGoogle Scholar
  69. Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3), 393–410.Google Scholar
  70. Su, W. (2015). From culture for the people to culture for profit: the PRC’s journey toward a cultural industries approach. International Journal of Cultural Policy, 21(5), 513–528.CrossRefGoogle Scholar
  71. Throsby, D. (1995). Culture, economics and sustainability. Journal of Cultural Economics, 19(3), 199–206.CrossRefGoogle Scholar
  72. Throsby, D. (2001). Economics and culture. Cambridge: Cambridge University Press.Google Scholar
  73. Throsby, D. (2008). The concentric circles model of the cultural industries. Cultural Trends, 17(3), 147–164.CrossRefGoogle Scholar
  74. Throsby, D. (2012). Why should economists be interested in cultural policy? Economic Record, 88(s1), 106–109.CrossRefGoogle Scholar
  75. Throsby, D. (2015). The cultural industries as a sector of the economy. In K. Oakley & J. O’Connor (Eds.), The Routledge companion to the cultural industries (pp. 56–69). New York: Routledge.Google Scholar
  76. Tsai, K. S. (2017). When shadow banking can be productive: Financing small and medium enterprises in China. The Journal of Development Studies, 53, 2005–20208.CrossRefGoogle Scholar
  77. Vlassis, A. (2016). Soft power, global governance of cultural industries and rising powers: the case of China. International Journal of Cultural Policy, 22(4), 481–496.CrossRefGoogle Scholar
  78. Wang, X., Xu, L. C., & Zhu, T. (2004). State-owned enterprises going public: The case of China. Economics of Transition, 12(3), 467–487.CrossRefGoogle Scholar
  79. Wei, S. J., Xie, Z., & Zhang, X. (2017). From “made in China” to “innovated in China”: Necessity, prospect, and challenges. Journal of Economic Perspectives, 31(1), 49–70.CrossRefGoogle Scholar
  80. Wooldridge, J. M. (2013). Introductory econometrics: A modern approach. Mason: South-Western Cengage Learning.Google Scholar
  81. Yao, Y., & Yueh, L. (2009). Law, finance, and economic growth in China: An introduction. World Development, 37(4), 753–762.CrossRefGoogle Scholar
  82. Zhang, X. (2006). From institution to industry: Reforms in cultural institutions in China. International Journal of Cultural Studies, 9(3), 297–306.CrossRefGoogle Scholar
  83. Zhang, Y. (2015). The contingent value of social resources: Entrepreneurs’ use of debt-financing sources in western China. Journal of Business Venturing, 30(3), 390–406.CrossRefGoogle Scholar
  84. Zhang, X. (2016). The cultural industries in China: A historical review. In M. Keane (Ed.), Handbook of cultural and creative industries in China (pp. 105–115). Northampton: Edward Elgar Publishing.Google Scholar
  85. Zhang, J., Wang, L., & Wang, S. (2012). Financial development and economic growth: Recent evidence from China. Journal of Comparative Economics, 40(3), 393–412.CrossRefGoogle Scholar
  86. Zhu, M., Chen, W., Zhou, J., Gai, X., & Xiong, Q. (2018). The development of China’s financial system: A global perspective. China Economic Journal, 11, 1–19.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of BusinessSichuan Normal UniversityChengduChina
  2. 2.School of Media, Film and JournalismMonash UniversityCaulfield EastAustralia
  3. 3.Department of EconomicsMonash UniversityClaytonAustralia
  4. 4.School of BusinessNortheast Normal UniversityChangchunChina

Personalised recommendations