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Agglomeration and Firm Financing: Evidence from High and New Technology Chinese Firms in the Pearl River Delta

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  • Qianfei Shu

Abstract

Using firm-level panel data from 1998 to 2015 for high and new technology firms in the Pearl River Delta in China, I investigated the effect of policy-directed industrial agglomeration on firm financing (trade credit and bank loan). I find that small and young firms are more likely to utilize trade credit, while large and old-established firms tend to rely on bank loans. I also find that the agglomeration effect is more remarkable for foreign and private-owned firms both in trade credit and bank loans, while state-owned firms fail to benefit from the effect of industrial agglomeration. These findings suggest that in China, policy-oriented industrial agglomeration plays an important role in alleviating financial constraints. Additionally, endogeneity issue is addressed by using two-stage estimation with instrumental variable and system generalized method of moments (GMM) estimation.

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  • Qianfei Shu, 2023. "Agglomeration and Firm Financing: Evidence from High and New Technology Chinese Firms in the Pearl River Delta," Chinese Economy, Taylor & Francis Journals, vol. 56(2), pages 124-146, March.
    • Handle: RePEc:mes:chinec:v:56:y:2023:i:2:p:124-146
    DOI: 10.1080/10971475.2022.2096807
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