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How do firms overcome financial constraint anxiety to survive in the market? Evidence from large manufacturing data

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  • Zhang, Dongyang

Abstract

In so far as financial constraints affect firm performance, they may expose firms to survival risks. Using a large panel of Chinese firms observed from 1998 to 2013, I analyse the causal relationship between firm survival and financial constraints and how firm performance impacts this relationship. I find that financial constraints play an important role in influencing firm survival. Moreover, financial constraints are the mechanism underlying the relationship between firm performance and survival, and productive and profitable firms can alleviate financial constraints. Privately owned and foreign-owned firms with more leverage face more difficulties surviving in the market; however, state-owned enterprises with more leverage can ease their financial limitations. Finally, I provide evidence that high dependency and high coverage ratios can facilitate firms' survival through alleviating financial constraints.

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  • Zhang, Dongyang, 2020. "How do firms overcome financial constraint anxiety to survive in the market? Evidence from large manufacturing data," International Review of Financial Analysis, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finana:v:70:y:2020:i:c:s1057521920301472
    DOI: 10.1016/j.irfa.2020.101503
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    More about this item

    Keywords

    Firm survival; Financial constraints; Firm performance; Large panel of Chinese firms;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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