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Financing Constraints and Firm’s Productivity Under the COVID-19 Epidemic Shock: Evidence of A-Shared Chinese Companies

Author

Listed:
  • Zoey Wong

    (Nanjing University)

  • Afei Chen

    (Nanjing University of Finance and Economics)

  • Farhad Taghizadeh-Hesary

    (Tokai University)

  • Rongrong Li

    (Nanjing University of Finance and Economics)

  • Qunxi Kong

    (Nanjing University of Finance and Economics)

Abstract

Focusing on the financing barriers to firm productivity improvement under the influence of external shocks, we empirically analyze the data of A-share listed companies from 2007-2018 to determine the impact of financing constraints on total factor productivity (TFP) in the context of COVID-19 pandemic and the paths of factor use efficiency and R&D innovation efficiency on this impact using ordinary least-squares (OLS) method. We find that financing constraints are an important factor inhibiting the TFP of firms. This inhibitory effect is more serious in small-scale firms, non-state firms, and non-energy firms. Further investigation shows that the inhibitory effect of financing constraints on firms’ TFP is more pronounced when firms are located in the Yangtze River Delta city cluster, the Pearl River Delta city cluster, non-port cities, and provincial capitals. The mechanism test finds that improving the efficiency of capital use and labor use can alleviate the suppressive effect of financing constraints on TFP. The alleviating impact is more significant when capital use efficiency is improved. However, increasing the efficiency of R&D innovation further strengthens the inhibitory effect of financing constraints, and this effect is more pronounced under positive external shocks.

Suggested Citation

  • Zoey Wong & Afei Chen & Farhad Taghizadeh-Hesary & Rongrong Li & Qunxi Kong, 2023. "Financing Constraints and Firm’s Productivity Under the COVID-19 Epidemic Shock: Evidence of A-Shared Chinese Companies," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 167-195, February.
    • Handle: RePEc:pal:eurjdr:v:35:y:2023:i:1:d:10.1057_s41287-021-00501-1
    DOI: 10.1057/s41287-021-00501-1
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