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Financial underdevelopment, distorted lending and export market survival

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  • Ziliang Deng
  • Lei Hou

Abstract

This paper examines the impact of financial development on exporter survival in foreign markets with Chinese firm-level data over the period 1998-2008. We measure financial development using the size, lending efficiency, term structure of bank loans and degree of state intervention in financial resource allocation, respectively. We find that a larger scale and greater efficiency of bank lending and less state intervention facilitate while the relative abundance of long-term credit deteriorates exporter survival. These effects are more pronounced for private exporters compared with state-owned exporters. For foreign-invested exporters, weakened state intervention is of relatively great importance. We attribute this disproportional impact to the government's intervention in funding investment and the distortional lending of banks, which varies across regions and industries with different levels of presence of state-owned enterprises.

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  • Ziliang Deng & Lei Hou, 2014. "Financial underdevelopment, distorted lending and export market survival," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(5), pages 600-625, August.
    • Handle: RePEc:taf:jitecd:v:23:y:2014:i:5:p:600-625
    DOI: 10.1080/09638199.2013.771696
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    1. World Bank, 2005. "China : Integration of National Product and Factor Markets, Economic Benefits and Policy Recommendations," World Bank Publications - Reports 8690, The World Bank Group.
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