Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China
42 Pages Posted: 8 Aug 2017 Last revised: 20 Oct 2017
Date Written: August 6, 2017
This paper investigates the heterogeneous and time-varying effects of financial credits on firm-level export performance. China's WTO accession leads to trade deregulation, which encourages a vast number of small domestic private firms to switch their exporting mode from indirect (through intermediaries) to direct exporting. Using a data set covering comprehensive Chinese manufacturing firms and employing a difference-in-differences approach (DID), we find that financial credits improve firm-level exports and productivity more for firms that switch from indirect to direct exporting than continuous indirect exporting firms. Further, we employ a difference-in-difference-in-differences (DDD) approach and find that improvements in firm-level internal and external finance have larger positive impacts on firm export values in the post-WTO accession period, conditioning on the firm switching from indirect to direct exporting. The time-varying impact may suggest an export distortion in China before its WTO accession, which prevents more productive but financially constrained small private domestic firms from direct exporting.
Keywords: Financial Credits, Exporting Mode, Difference-in-Differences
JEL Classification: F13, F14, F61, G20, G28
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