[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v44y2021i1p286-311.html
   My bibliography  Save this article

Credit rationing and firm exports: Microeconomic evidence from small and medium‐sized enterprises in China

Author

Listed:
  • Dong Cheng
  • Yong Tan
  • Jian Yu
Abstract
This paper examines the effect of credit rationing on export performance by small and medium‐sized firms in China. We use a detailed firm‐level data provided by the Small and Medium‐sized Enterprises Dynamic Survey (SMEDS) during 2015–16 to conduct this analysis. The SMEDS provides firm‐specific measures of credit rationing based directly on firm‐level responses to the survey rather than indirect ones, based on firm‐level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduces export probability of small and medium‐sized enterprises (SMEs) by 15.1% and 39.6%, respectively. At the intensive margin, they decrease SMEs' export values by more than 20.0% and over 28.8%, respectively. Different than existing literature, we construct valid firm‐level instruments, firm‐level housing stock, for credit rationing rather than using province‐level instruments. We also employ county‐industry‐level instruments and obtain consistent estimates. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilisation rates.

Suggested Citation

  • Dong Cheng & Yong Tan & Jian Yu, 2021. "Credit rationing and firm exports: Microeconomic evidence from small and medium‐sized enterprises in China," The World Economy, Wiley Blackwell, vol. 44(1), pages 286-311, January.
    • Handle: RePEc:bla:worlde:v:44:y:2021:i:1:p:286-311
    DOI: 10.1111/twec.12913
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/twec.12913
    Download Restriction: no
    File URL: https://libkey.io/10.1111/twec.12913?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bee Yan Aw & Mark J. Roberts & Daniel Yi Xu, 2011. "R&D Investment, Exporting, and Productivity Dynamics," American Economic Review, American Economic Association, vol. 101(4), pages 1312-1344, June.
    2. Oliver Hart & John Moore, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 841-879.
    3. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(2), pages 711-744.
    4. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," NBER Working Papers 13103, National Bureau of Economic Research, Inc.
    5. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    6. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    7. Hanming Fang & Quanlin Gu & Wei Xiong & Li-An Zhou, 2016. "Demystifying the Chinese Housing Boom," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 105-166.
    8. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 379-436.
    9. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    10. Jie Gan, 2007. "The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel," The Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1941-1973, November.
    11. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    12. Firth, Michael & Lin, Chen & Liu, Ping & Wong, Sonia M.L., 2009. "Inside the black box: Bank credit allocation in China's private sector," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1144-1155, June.
    13. Benfratello, Luigi & Schiantarelli, Fabio & Sembenelli, Alessandro, 2008. "Banks and innovation: Microeconometric evidence on Italian firms," Journal of Financial Economics, Elsevier, vol. 90(2), pages 197-217, November.
    14. Chaney, Thomas, 2016. "Liquidity constrained exporters," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 141-154.
    15. Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 473-494.
    16. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, May.
    17. Dong Cheng & Zhongzhong Hu & Yong Tan, 2021. "Heterogeneous impacts of finance on firm exports: Evidence from export deregulation in a large developing country," The World Economy, Wiley Blackwell, vol. 44(11), pages 3326-3350, November.
    18. repec:wyi:journl:002196 is not listed on IDEAS
    19. Maria Luisa Mancusi & Andrea Vezzulli, 2014. "R&D AND CREDIT RATIONING IN SMEs," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1153-1172, July.
    20. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
    21. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
    22. Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2014. "Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 729-744, October.
    23. Mi Dai & Miaojie Yu, 2013. "Firm R&D, Absorptive Capacity and Learning by Exporting: Firm-level Evidence from China," The World Economy, Wiley Blackwell, vol. 36(9), pages 1131-1145, September.
    24. Bai, Xue & Krishna, Kala & Ma, Hong, 2017. "How you export matters: Export mode, learning and productivity in China," Journal of International Economics, Elsevier, vol. 104(C), pages 122-137.
    25. repec:hal:spmain:info:hdl:2441/75koqefued8i7pihbrl9u84p4u is not listed on IDEAS
    26. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    27. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Does Local Financial Development Matter?," Springer Books, in: Damiano Bruno Silipo (ed.), The Banks and the Italian Economy, chapter 0, pages 31-66, Springer.
    28. Barro, Robert J, 1976. "The Loan Market, Collateral, and Rates of Interest," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(4), pages 439-456, November.
    29. Chandra, Piyush & Long, Cheryl, 2013. "VAT rebates and export performance in China: Firm-level evidence," Journal of Public Economics, Elsevier, vol. 102(C), pages 13-22.
    30. Kalina Manova & Shang-Jin Wei & Zhiwei Zhang, 2015. "Firm Exports and Multinational Activity Under Credit Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 574-588, July.
    31. Lubomír Lízal & Jan Svejnar, 2002. "Investment, Credit Rationing, And The Soft Budget Constraint: Evidence From Czech Panel Data," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 353-370, May.
    32. Edward Glaeser & Wei Huang & Yueran Ma & Andrei Shleifer, 2017. "A Real Estate Boom with Chinese Characteristics," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 93-116, Winter.
    33. repec:hal:spmain:info:hdl:2441/5g3sadr9h8gbri8hrtq0h6au2 is not listed on IDEAS
    34. Minetti, Raoul & Zhu, Susan Chun, 2011. "Credit constraints and firm export: Microeconomic evidence from Italy," Journal of International Economics, Elsevier, vol. 83(2), pages 109-125, March.
    35. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2014. "Challenges of working with the Chinese NBS firm-level data," China Economic Review, Elsevier, vol. 30(C), pages 339-352.
    36. Cull, Robert & Xu, Lixin Colin, 2003. "Who gets credit? The behavior of bureaucrats and state banks in allocating credit to Chinese state-owned enterprises," Journal of Development Economics, Elsevier, vol. 71(2), pages 533-559, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu, Jian & Peng, Fanjia & Shi, Xunpeng & Yang, Longjian, 2022. "Impact of credit guarantee on firm performance: Evidence from China’s SMEs," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 624-636.
    2. Dong Cheng & Zhongzhong Hu & Yong Tan, 2021. "Heterogeneous impacts of finance on firm exports: Evidence from export deregulation in a large developing country," The World Economy, Wiley Blackwell, vol. 44(11), pages 3326-3350, November.
    3. Guo, Dongmei & Li, Qin & Liu, Peng & Shi, Xunpeng & Yu, Jian, 2023. "Power shortage and firm performance: Evidence from a Chinese city power shortage index," Energy Economics, Elsevier, vol. 119(C).
    4. Li, Weihao & Hu, Hongbing & Hong, Zekun, 2024. "Green finance policy, ESG rating, and cost of debt——Evidence from China," International Review of Financial Analysis, Elsevier, vol. 92(C).
    5. Yu, Jian & Fu, Jiasha, 2021. "Credit rationing, innovation, and productivity: Evidence from small- and medium-sized enterprises in China," Economic Modelling, Elsevier, vol. 97(C), pages 220-230.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheng, Dong & Tan, Yong & Yu, Jian, 2017. "Credit Rationing and Firm Exports: Micro Evidence from SMEs in China," MPRA Paper 81914, University Library of Munich, Germany.
    2. Dong Cheng & Zhongzhong Hu & Yong Tan, 2021. "Heterogeneous impacts of finance on firm exports: Evidence from export deregulation in a large developing country," The World Economy, Wiley Blackwell, vol. 44(11), pages 3326-3350, November.
    3. Maria Luisa Mancusi & Andrea Vezzulli & Serena Frazzoni & Zeno Rotondi & Maurizio Sobrero, 2018. "Export and Innovation in Small and Medium Enterprises: The Role of Concentrated Bank Borrowing," Economica, London School of Economics and Political Science, vol. 85(337), pages 177-204, January.
    4. Fan, Haichao & Lai, Edwin L.-C. & Li, Yao Amber, 2015. "Credit constraints, quality, and export prices: Theory and evidence from China," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 390-416.
    5. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2016. "Export price adjustments under financial constraints," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(3), pages 1057-1085, August.
    6. Chen, Zhao & Poncet, Sandra & Xiong, Ruixiang, 2020. "Local financial development and constraints on domestic private-firm exports: Evidence from city commercial banks in China," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 56-75.
    7. Manova, Kalina & Yu, Zhihong, 2016. "How firms export: Processing vs. ordinary trade with financial frictions," Journal of International Economics, Elsevier, vol. 100(C), pages 120-137.
    8. Yao Amber Li & Albert Park & Chen Zhao, 2015. "Credit Distribution and Exports: Microeconomic Evidence from China," HKUST IEMS Working Paper Series 2015-31, HKUST Institute for Emerging Market Studies, revised Nov 2015.
    9. Ding, Haoyuan & Ni, Bei & Xue, Chang & Zhang, Xiaoyu, 2022. "Land holdings and outward foreign direct investment: Evidence from China," Journal of International Money and Finance, Elsevier, vol. 124(C).
    10. Serena Frazzoni & Maria Luisa Mancusi & Zeno Rotondi & Maurizio Sobrero & Andrea Vezzulli, 2014. "Innovation and export in SMEs: the role of relationship banking," DISCE - Working Papers del Dipartimento di Economia e Finanza def018, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    11. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    12. Nguyen, Quyen T.K. & Almodóvar, Paloma & Wei, Ziyi, 2022. "Intra-firm and arm’s length export propensity and intensity of MNE foreign subsidiaries," Journal of Business Research, Elsevier, vol. 145(C), pages 288-308.
    13. Wu, Guiying Laura, 2018. "Capital misallocation in China: Financial frictions or policy distortions?," Journal of Development Economics, Elsevier, vol. 130(C), pages 203-223.
    14. Michel Bernini & Sarah Guillou & Flora Bellone, 2013. "Firms leverage and export quality evidence from France," Working Papers hal-00973035, HAL.
    15. José Manuel Mansilla-Fernández & Juliette Milgram-Baleix, 2023. "Working capital management, financial constraints and exports: evidence from European and US manufacturers," Empirical Economics, Springer, vol. 64(4), pages 1769-1810, April.
    16. repec:hal:wpspec:info:hdl:2441/f6h8764enu2lskk9p4sr364g4 is not listed on IDEAS
    17. Cheng, Dong & Hu, Zhongzhong & Tan, Yong, 2017. "Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China," MPRA Paper 80657, University Library of Munich, Germany.
    18. Nakhoda, Aadil, 2012. "The influence of financial leverage of firms on their international trading activities," MPRA Paper 35765, University Library of Munich, Germany.
    19. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p4sr364g4 is not listed on IDEAS
    20. Zhao Chen & Sandra Poncet & Ruixiang Xiong, 2016. "Local Financial Development and constraints on private firms' exports: EvACidence from City Commercial Banks in China," Working Papers 2016-27, CEPII research center.
    21. repec:spo:wpmain:info:hdl:2441/f6h8764enu2lskk9p4sr364g4 is not listed on IDEAS
    22. Li, Jie & Ouyang, Zhigang & Zhang, Naixin, 2023. "Processing trade and credit constraints," Journal of Corporate Finance, Elsevier, vol. 83(C).
    23. Dai, Mi & Nucci, Francesco & Pozzolo, Alberto F. & Xu, Jianwei, 2021. "Access to finance and the exchange rate elasticity of exports," Journal of International Money and Finance, Elsevier, vol. 115(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:44:y:2021:i:1:p:286-311. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.