Seminar Vol. 97

Topic: Credit Card Use and Small Business Finance: Evidence from China

Speaker: Zhao Rong, Nanjing Audit University

Time: May 18th, 2018 15:00–16:15

Venue: Conference Room 102, Zhonghui Building

Abstract:

Resources from formal finance (here credit card lines) can be reallocated to finance small businesses, which are supposed to be less accessible to formal finance. By examining small businesses in China, we provide direct evidence on such a reallocation. We find that households with informal small businesses are more likely to use credit cards when their businesses are credit constrained. We further find that this effect is more pronounced when credit card density is higher in the community, when the owner holds urban hukou, when the owner is more financially knowledgeable, and when the business is more aged. Additionally, this effect also exists among formal small businesses, and it is significant not only at the extensive margin but also at the intensive margin. Last, we find that credit card access enhances informal small businesses’ subsequent survival rates.