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Financial agglomeration and firms' domestic value added in exports: Evidence from China

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  • Xie, Mufang
  • Yu, Binbin
  • Zhong, Changbiao

Abstract

Using data on 145,687 Chinese firms from 2003 to 2013, we examine the impact of financial agglomeration on the ratio of domestic value added in exports to gross exports (DVAR) of firms. We find that both local financial agglomeration and spatial spillover significantly increase firms' DVAR. The primary mechanisms driving this relationship are the facilitation of research and development innovation and the reduction of financing costs. The positive impact of financial intermediary agglomeration on DVAR is more pronounced, and the spillover effect of financial agglomeration on DVAR increases with the level of the financial center. Financial agglomeration exerts greater positive impacts on DVAR of upstream value chain firms, general trade firms, private firms, and small-scale firms. We also demonstrate that financial marketization amplifies the positive effect of financial agglomeration.

Suggested Citation

  • Xie, Mufang & Yu, Binbin & Zhong, Changbiao, 2025. "Financial agglomeration and firms' domestic value added in exports: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025005878
    DOI: 10.1016/j.iref.2025.104424
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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