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Internal financial constraints and firm productivity in China: Do liquidity and export behavior make a difference?

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Listed author(s):
  • Chen, Minjia
  • Guariglia, Alessandra

Abstract

Financial factors have been found highly important in influencing firms’ real activities and in promoting aggregate growth. Yet, the linkage between finance and firm-level productivity has been overlooked in the literature. We fill this gap using a panel of 130,840 Chinese manufacturing firms over the period 2001–2007 to estimate a TFP model augmented with cash flow. We find that, especially for illiquid foreign and private firms, productivity is strongly constrained by the availability of internal finance. Furthermore, contrary to private firms, foreign non-exporters display higher dependence of productivity on cash flow than exporters.

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Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 41 (2013)
Issue (Month): 4 ()
Pages: 1123-1140

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Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1123-1140
DOI: 10.1016/j.jce.2013.05.003
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622864

Keywords: Productivity; Cash flow; Liquidity; Exports;

Find related papers by JEL classification:

  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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  1. Anna M. Ferragina & Fernanda Mazzotta & Khalid Sekkat, 2016. "Financial constraints and productivity growth across the size spectrum: microeconomic evidence from Morocco," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 361-381, December.
  2. Cheng, Dong & Hu, Zhongzhong & Tan, Yong, 2017. "Time-Varying Impacts of Financial Credits on Firm Exports: Evidence from Trade Deregulation in China," MPRA Paper 80657, University Library of Munich, Germany.
  3. Yongzheng Liu & Jie Mao, 2017. "How do Tax Incentives A ect Investment and Productivity? Firm-Level Evidence from China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1716, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. International Monetary Fund, 2016. "Ireland; Selected Issues," IMF Staff Country Reports 16/257, International Monetary Fund.
  5. Ameer, Rashid, 2014. "Financial constraints and corporate investment in Asian countries," Journal of Asian Economics, Elsevier, vol. 33(C), pages 44-55.
  6. ABEBE, Girum & TEKLE, Biruk & MANO, Yukichi, 2015. "Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses," Discussion paper series HIAS-E-15, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  7. repec:eee:chieco:v:44:y:2017:i:c:p:1-15 is not listed on IDEAS
  8. Ahad, Muhammad & Dar, Adeel Ahmad & Imran, Muhammad, 2017. "Does Financial Development Promote Industrial Production in Pakistan? Evidence from Combine Cointegration and Causality Approach," MPRA Paper 76458, University Library of Munich, Germany.
  9. Dereje Regasa & David Fielding & Helen Roberts, 2017. "Access to Financing and Firm Growth: Evidence from Ethiopia," Working Papers 1707, University of Otago, Department of Economics, revised Apr 2017.
  10. Yano, Go & Shiraishi, Maho, 2015. "Trade credit and ethnicity: Case of ethnic minority area in China," China Economic Review, Elsevier, vol. 36(C), pages 236-260.
  11. Jun Du & Yama Temouri, 2015. "High-growth firms and productivity: evidence from the United Kingdom," Small Business Economics, Springer, vol. 44(1), pages 123-143, January.
  12. Xiaodan Yu & Giovanni Dosi & Marco Grazzi & Jiasu Lei, 2015. "Inside the Virtuous Cycle between Productivity, Profitability, Investment and Corporate Growth: An Anatomy of China Industrialization," LEM Papers Series 2015/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  13. repec:eee:ecosys:v:41:y:2017:i:2:p:179-202 is not listed on IDEAS
  14. repec:eee:respol:v:46:y:2017:i:5:p:1020-1038 is not listed on IDEAS
  15. Murphy, Gavin & Siedschlag, Iulia, 2016. "Exporting under Financing Constraints: Firm-level Evidence from EU Countries," Papers WP530, Economic and Social Research Institute (ESRI).

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