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Credit rationing and firm exports: Microeconomic evidence from small and medium‐sized enterprises in China
Author(s) -
Cheng Dong,
Tan Yong,
Yu Jian
Publication year - 2021
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12913
Subject(s) - credit rationing , collateral , margin (machine learning) , china , market liquidity , economics , rationing , business , monetary economics , finance , interest rate , health care , machine learning , computer science , law , political science , economic growth
This paper examines the effect of credit rationing on export performance by 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) during 2015–16 to conduct this analysis. The SMEDS provides firm‐specific measures of credit rationing based directly on firm‐level responses to the survey rather than indirect ones, based on firm‐level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduces export probability of small and medium‐sized enterprises (SMEs) by 15.1% and 39.6%, respectively. At the intensive margin, they decrease SMEs' export values by more than 20.0% and over 28.8%, respectively. Different than existing literature, we construct valid firm‐level instruments, firm‐level housing stock, for credit rationing rather than using province‐level instruments. We also employ county‐industry‐level instruments and obtain consistent estimates. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilisation rates.