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

Dong Cheng

Vanderbilt University

Zhongzhong Hu

University of International Business and Economics (UIBE)

Yong Tan

Nanjing University of Finance and Economics

Date Written: August 6, 2017

Abstract

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

Suggested Citation

Cheng, Dong and Hu, Zhongzhong and Tan, Yong, Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China (August 6, 2017). Available at SSRN: https://ssrn.com/abstract=3014528 or http://dx.doi.org/10.2139/ssrn.3014528

Dong Cheng (Contact Author)

Vanderbilt University ( email )

VU Station B, Box #351819
2301 Vanderbilt Place
Nashville, TN 37235
United States

Zhongzhong Hu

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Yong Tan

Nanjing University of Finance and Economics ( email )

Nanjing
China

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