Heterogeneous Impacts of Finance on Firm Exports: Evidence from Export Deregulation in A Large Developing Country

51 Pages Posted: 8 Aug 2017 Last revised: 13 Nov 2019

See all articles by Dong Cheng

Dong Cheng

Union College

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 effects of finance on firm exports through the lens of differential exporting modes. China’s WTO accession leads to an export deregulation, which empowers private domestic firms with low registered capital to export directly. This quasi-natural experiment encourages firms switching from indirect to direct exporting, and thus providing an ideal setting to explore the heterogeneous effects of finance on exports for switchers and non-switchers. Applying the difference-in-differences (DID) approach to a comprehensive survey data on Chinese manufacturing firms, we find that finance improves exports more for firms switching from indirect to direct exporting, relative to continuous indirect exporters. Moreover, we show that the heterogeneous effects of finance on exports for switchers and non-switchers are more pronounced in the post-WTO accession period. The time-varying heterogeneous impacts suggest an economic loss caused by the export distortion before China’s WTO accession because it prevents productive but financially constrained private domestic firms from direct exporting.

Keywords: Finance, Exporting Mode, Export Deregulation, Difference-in-Differences

JEL Classification: F13, F14, F61, G20, G28

Suggested Citation

Cheng, Dong and Hu, Zhongzhong and Tan, Yong, Heterogeneous Impacts of Finance on Firm Exports: Evidence from Export Deregulation in A Large Developing Country (August 6, 2017). Available at SSRN: https://ssrn.com/abstract=3014528 or http://dx.doi.org/10.2139/ssrn.3014528

Dong Cheng (Contact Author)

Union College ( email )

807 Union Street
Schenectady, NY 12308
United States

HOME PAGE: http://www.dongcarlcheng.com

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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