Credit Rationing and Firm Exports: Microeconomic Evidence from SMEs in China
38 Pages Posted: 20 Oct 2017 Last revised: 21 Oct 2017
Date Written: October 15, 2017
In this study we examine the effect of credit rationing on export performance for 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) to conduct this analysis. SMEDS provides firm-specific measures of credit rationing based directly on firm-level responses to the survey rather than indirectly from firm-level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduce SMEs’ export probability by 22% and 36%, respectively. At the intensive margin, they decrease SMEs’ export values by more than 32% and over 66%, respectively. Different from existing literature, we construct valid firm-level instruments, firm-level housing investments and receivables, for credit rationing rather than using province-level instruments. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilization rates.
Keywords: SMEs, Strong Credit Rationing, Weak Credit Rationing, Firm Exports
JEL Classification: F10, G20
Suggested Citation: Suggested Citation