Social Capital and Access to Bank Financing: The Case of Chinese Entrepreneurs

This paper presents the results of a study of the effects of social capital on access to bank financing. Based on a Chinese nationwide survey, our analysis suggests that entrepreneurs who contribute to charities are more likely to be successful in loan applications. In addition, we find that political party membership is an important determinant of state-owned bank financing, whereas time spent on social activities increases the probability of obtaining loans from commercial banks. Therefore, our data provide some evidence for substitutability between various types of social capital. To obtain a loan from a specific type of bank, an entrepreneur should access the relevant social network.