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Credit Allocation and Firm Productivity Under Financial Imperfection: Evidence from Chinese Manufacturing Firms

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  • Hua Shang
  • Teng Zhang
  • Puman Ouyang

Abstract

The role of the financial system, especially the credit market, in productivity enhancement has interested many researchers. However, how credit allocation affects firms’ productivity in emerging economies remains unanswered. Using data from the Annual Survey of Industrial Firms (ASIF) during 1999–2007, this article examines whether credit allocation impacts Chinese firms’ productivity under financial imperfection. Our results show that the size of credit market has no influence on Chinese firms’ total factor productivity (TFP), while allocating more credit to non-SOEs significantly promotes firm TFP. Our further analysis shows that firms which are less subsidized, smaller, more external financially dependent, and more labor intensive are affected more by credit allocation. As China is the largest emerging economy, our analysis also sheds light on the development of firms in emerging economies.

Suggested Citation

  • Hua Shang & Teng Zhang & Puman Ouyang, 2018. "Credit Allocation and Firm Productivity Under Financial Imperfection: Evidence from Chinese Manufacturing Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(5), pages 992-1010, April.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:5:p:992-1010
    DOI: 10.1080/1540496X.2017.1410474
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    Cited by:

    1. Dongmei Wang & Yangyang Sun, 2022. "The effect of different government subsidies on total-factor productivity: Evidence from private listed manufacturing enterprises in China," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-19, January.
    2. Feng, Lingbing & Fu, Tong & Kutan, Ali M., 2019. "Can government intervention be both a curse and a blessing? Evidence from China's finance sector," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 71-81.
    3. Tao Gu, 2020. "The behavior of private entrepreneurs in an imperfect financial market," Economics Bulletin, AccessEcon, vol. 40(1), pages 349-358.

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