Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China

Cheng, Dong and Hu, Zhongzhong and Tan, Yong (2017): Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China.

Abstract

This paper investigates the heterogeneous and time-varying effects of financial credits on firm-level export performance. Using a data set covering comprehensive Chinese manufacturing firms and employing a difference-in-differences approach, we find that financial credits improve firm-level exports and productivity more for firms switching from indirect to direct export than continuing indirect exporting firms. Further, we employ a difference-in-difference-in-differences approach and find that improvements in firm-level 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Credits, WTO Accession, Indirect export, Direct Export, Difference-in-Differences
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; F - International Economics > F6 - Economic Impacts of Globalization > F61 - Microeconomic Impacts; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

References

Ackerberg, D. A., K. Caves and G. Frazer 2015.“Identification Properties of Recent Production Function Estimators.” Econometrica, 83, 2411-51.

Ahn, J., A. K. Khandelwal, and S. J. Wei 2011. “The Role of Intermediaries in FacilitatingTrade.” Journal of International Economics, 84, 73-85.

Amiti, M. and D. Weinstein 2011. “Exports and Financial Shocks.” Quarterly Journal of Economics, 126 (4), 1841-77.

Arkolakis, C. 2011. “Market Penetration Costs and the New Consumers Margin in International Trade.” Journal of Political Economy, 118 (6): 1151-1199.

Arkolakis, C., A. Costinot, and A. Rodriguez-Clare 2012. “New Trade Models, Same Old Gains?” American Economic Review, 102 (1), 94-130.

Alvarez, R. and R.A. Lo´pez 2005. “Exporting and Performance: Evidence from Chilean Plants.” Canadian Journal of Economics, 38 (4), 1384-1400.

Aw, B.Y., S. Chung, and M. Roberts 2000. “Productivity and Turnover in the Export Market: Micro Evidence from Taiwan and South Korea.” World Bank Economic Review, 14 (1): 1-65.

Aw, B.Y., Y. Xu, and M. Roberts. 2011. “R&D Investment, Exporting, and Productivity Dynamics.” American Economic Review, 101 (4), 1312-1344.

Bai, X., K. Krishna, and H. Ma 2017. “How You Export Matters: Export Mode, Learning and Productivity in China.” Journal of International Economics, 104, 122-137.

Baum, C.F., M. E. Schaffer, and S. Stillman 2007. “Enhanced Routines for Instrumental Variables Generalized Method of Moments Estimation and Testing.” Stata Journal, 7, 465-506.

Berman, N. and J. H´ericourt 2010. “Financial Factors and the Margins of Trade: Evidence from Cross-country Firm-level Data.” Journal of Development Economics, 93, 206-17.

Bernard, A. B., E. J. Blanchard, I. Van Beveren, and H. Y. Vandenbussche 2012. “Carryalong Trade.” NBER Working Paper, No. 18246.

Bernard, A. B., I. Van Beveren, and H. Y. Vandenbussche 2010. “Multi-product Exporters, Carry-along Trade and the Margins of Trade.” National Bank of Belgium Working Paper, No. 20339

Brandt, L., J. Van Biesebroeck, and Y. Zhang 2012. “Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing.” Journal of Development Economics, 97, 339-51.

Brandt, L., J. Van Biesebroeck, L. Wang, and Y. Zhang 2017. “WTO Accession and Performance of Chinese Manufacturing Firms.” American Economic Review, forthcoming.

Campa, J. M., and J. M., Shaver 2002. “Exporting and Capital Investment: On the Strategic Behavior of Exporters.” Iese Research Papers.

Channey, T. 2016. “Liquidity Constraint Exporters.” Journal of Economic Dynamics and Control, 72, 141-154.

Chen, M. and A. Guariglia 2013. “Internal Financial Constraints and Firm Productivity in China: Do Liquidity and Export Behavior Make a Difference?” Journal of Comparative Economics, 41 (4), 1123-40.

Cragg, J. G. and S.G. Donald 1993. “Testing Identifiability and Specification in Instrumental Variables Models.” Econometric Theory, 9 (2), 222-40.

Dai, M., M. Maitra, and M. Yu 2016. “Unexceptional Exporter Performance in China? The Role of Processing Trade.” Journal of Development Economics, 121, 177-89.

Dai, M., and M. Yu 2013. “Firm R&D, Absorptive Capacity and Learning by Exporting: Firm-Level Evidence from China.” The World Economy, 36 (9), 1131-1145.

De Loecker, J. 2007. “Do Exporters Generate Higher Productivity? Evidence from Slovenia.” Journal of International Economics, 73, 69-98.

De Loecker, J. 2013. “Detecting Learning by Exporting.” American Economic Journal: Microeconomics, 5(5), 1-21.

Deloof, M. 2003. “Does Working Capital Management Affect Profitability of Belgian Firms?” Journal of Business Finance & Accounting, 30, 573-588.

Ding, S., A. Guariglia and J. Knight 2013. “Investment and Financing Constraints in China: Does Working Capital Management Make a Difference?” Journal of Bandking & Finance, 37(5), 1490-1507.

Egan, M., and A. Mody 1992. “Buyer-Seller Links in Export Development.” World Development, 20(3), 321-334.

Eljelly, A. 2004. “Liquidity-Profitability Tradeoff. An Emprical Investigation in an Emerging Market.” International Journal of Commerce and Management, 14(2), 48-61.

Feenstra, R. C., Z. Li, and M. Yu 2014. “Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China.” Review of Economics and Statistics, 96 (4), 729-44.

Guariglia, A., X. Liu, and L. Song 2011. “Internal Finance and Growth: Microeconometric Evidence on Chinese Firms.” Journal of Development Economics, 96, 79-94.

Girma, S., D. Greenaway, and R. Kneller 2004. “Does Exporting Increase Productivity? A Microeconomic Analysis of Matched Firms.” Review of International Economics, 12 (5), 855-66.

Greenaway, D., A. Guariglia, and R. Kneller 2007. “Financial Factors and Exporting Decisions.” Journal of International Economics, 73, 377-95.

Garcia-Marin A. and N. Voigtla¨nder 2017. “Exporting and Plant-Level Efficiency Gains: It’s the Measure” Working Paper.

Hsieh, C. T. and P. J. Klenow 2009. “Misallocation and Manufacturing TFP in China and India.” Quarterly Journal of Economics, 124 (4), 1403-48.

Imbens, G. W. and J. D. Angrist 1994. “Identification and Estimation of Local Average Treatment Effects.” Econometrica, 62 (2), 467-475.

Imbens, G. W. and J. Wooldridge 2007. “What’s New in Econometrics: Difference-in-Differences Estimation.” NBER Summer Institute Econometric Lectures.

Jarreau, J. and S. Poncet 2014. “Credit Constraints, Firm Ownership and the Structure of Exports in China.” International Economics, 139 (4), 152-73.

Khandelwal, A., P. Schott, and S.J. Wei 2013. “Trade Liberalization and Embeded Institutional Reform: Evidence from Chinese Exporters.” American Economic Review, 103 (6), 2169-95.

Kraay, A. 1999. “Exports and Economic Performance: Evidence from a Panel of Chinese Enterprises.” mimeo, World Bank.

Lileeva, A. and D. Trefler 2010. “Improved Access to Foreign Markets Raises Plant-level ProductivityFor Some Plants.” Quarterly Journal of Economics, 125 (3), 1051-1099.

Levinsohn, J. and A. Petrin 2003. “Estimating Production Functions Using Inputs to Control for Unobservables.” Review of Economic Studies, 70, 317-41.

Manova, K., S. J. Wei, and Z. Zhang 2015. “Firm Exports and Multinational Activity under Credit Constraints.” Review of Economics and Statistics, 97 (3), 574-88.

Manova, K. and Z. Yu 2016. “How Firms Export: Processing vs. Ordinary Trade with Financial Frictions.” Journal of International Economics, 100, 120-137.

Manova, K. and Z. Zhang 2012. “Export Prices across Firms and Destinations.” Quarterly Journal of Economics, 127 (1), 379-436.

Melitz, M., and S. J. Redding 2015. “New Trade Models, New Welfare Implications. ”American Economic Review, 105(3), 1105-1146.

Meyer, B. D. 1995. “Natural and Quasi-experiments in Economics.” Journal of Business and Economic Statistics, 13 (2), 151-61.

Minetti, R. and S. C. Zhu 2011. “Credit Constraints and Firm Export: Microeconomic Evidence from Italy.” Journal of International Economics, 83, 109-25.

Olley, S. and A. Pakes 1996. “The Dynamics of Productivity in the Telecommunications Equipment Industry.” Econometrica, 64, 1263-97.

Petersen, M. and R. G. Rajan 1997. “Trade Credit: Theories and Evidence” The Review of Financial Studies, 10(3), 661-691.

Shin, H. and L. Soenen 1998. “Efficiency of Working Capital Management and Corporate Profitability” Finacial Practice and Education, (8), 37-45.

Staiger, D. and J. H. Stock 1997. “Instrumental Variables Regression with Weak Instruments.” Econometrica, 65 (3), 557-86.

Stock, J. and M. Yogo 2005. “Testing for Weak Instruments in Linear IV Regression.” In: Andrews DWK Identification and Inference for Econometric Models, New York: Cambridge University Press.

Van Biesebroeck, J. 2006. “Exporting Raises Productivity in Sub-Saharan African Manufacturing Firms.” Journal of International Economics, 67 (2), 373-91.

Wooldridge, J. W. 2009. “On Estimating Firm-level Production Functions Using Proxy Variables to Control for Unobservables.” Economics Letters, 104, 112-4.