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

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  • 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
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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Cited by:

  1. 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.
  2. X. Yu & G. Dosi & M. Grazzi & J. Lei, 2015. "Inside the Virtuous Cycle between Productivity, Profitability, Investment and Corporate Growth: An Anatomy of China Industrialization," Working Papers wp1006, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Murphy, Gavin & Siedschlag, Iulia, 2016. "Exporting under Financing Constraints: Firm-level Evidence from EU Countries," Papers WP530, Economic and Social Research Institute (ESRI).
  4. Girum Abebe & Biruk Tekle & Yukichi Mano, 2016. "Changing saving and investment behavior: the impact of financial literacy training and reminders on micro-businesses," CSAE Working Paper Series 2016-08, Centre for the Study of African Economies, University of Oxford.
  5. 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.

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