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Financing allocation efficiency and firm productivity: Evidence from a Chinese quasi-natural experiment

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  • Jiang, Mengting
  • Kong, Dongmin
  • Gong, Pu

Abstract

In 2017, China launched the Industry-Finance Cooperation Pilot Policy (IFCP) to improve financing allocation efficiency by strengthening linkages between industrial firms and financial institutions. Exploiting this policy as a quasi-natural experiment, we identify its effects on firm productivity and the underlying mechanisms. We find that higher financing allocation efficiency significantly raises productivity, operating primarily through alleviating external financing constraints, optimizing labor investment efficiency, and boosting R&D intensity. The effects are more pronounced for firms led by executives with financial expertise, for firms located in China’s economically advanced eastern region, and for non-manufacturing firms. These findings indicate that policy interventions that realign the external resource environment can complement firms’ internal capabilities.

Suggested Citation

  • Jiang, Mengting & Kong, Dongmin & Gong, Pu, 2026. "Financing allocation efficiency and firm productivity: Evidence from a Chinese quasi-natural experiment," Finance Research Letters, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:finlet:v:87:y:2026:i:c:s1544612325022792
    DOI: 10.1016/j.frl.2025.109030
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