Cross-shareholding and financing constraints of private firms: Based on the perspective of social network

• Published in: Physica A Vol. 520; pp. 381 - 389
• Main Authors: Peng, Zixuan, Sha, Haowei, Lan, Hongxing, Chen, Xudong
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 15.04.2019
• Subjects: Cross-shareholding; Financing constraint; Network position; Social network; Cross-shareholding; Network position; Social network; Financing constraint
• ISSN: 0378-4371; 1873-2119
• DOI: 10.1016/j.physa.2019.01.049

This paper examines the impact of cross-shareholding and network positions in the cross-shareholding network on the financing constraints of private firms in China. Two indices are constructed to measure the position characteristics: network centrality and structural holes. Based on the data of listed private firms for 2008-2014, we find that the cross-shareholding relationship can significantly relieve the financing constraints of private firms. However, the role of cross-shareholding in reducing financing constraints is weakened as the level of financial marketization increases. Further, the results suggest that the higher the centralities or the more structural holes of private firms there are in the cross-shareholding networks, the lower the financing constraints of private firms. •The impact of cross-shareholding on financing constraints of private firms is examined.•The impact is examined from the perspective of social network.•The cross-shareholding relation can relieve financing constraints of private firms.•The higher centralities in the social networks means lower financing constraints.