Credit Rationing and Firm Exports: Microeconomic Evidence from SMEs in China

38 Pages Posted: 20 Oct 2017 Last revised: 21 Oct 2017

Dong Cheng

Vanderbilt University

Yong Tan

Nanjing University of Finance and Economics

Jian Yu

Central University of Finance and Economics (CUFE) - School of Economics

Date Written: October 15, 2017

Abstract

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

Cheng, Dong and Tan, Yong and Yu, Jian, Credit Rationing and Firm Exports: Microeconomic Evidence from SMEs in China (October 15, 2017). Available at SSRN: https://ssrn.com/abstract=3055984 or http://dx.doi.org/10.2139/ssrn.3055984

Dong Cheng (Contact Author)

Vanderbilt University ( email )

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

Yong Tan

Nanjing University of Finance and Economics ( email )

Nanjing
China

Jian Yu

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing
China

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