Financial openness and firm exports: Evidence from Foreign-owned Banks in China

Chaofeng Lyu, Ziheng Xiao and Yun Pu

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: Firms involved in international trade require an active and efficient financial market to facilitate their credit services and this is enhanced by financial openness. This study identified the impact of financial openness on Chinese firms' exports by 386 foreign-owned banks in China from 1996 to 2019 as a quasi-natural experiment. We constructed an estimation technique that combines the parallel trend test (PTT) and propensity score matching (PSM) with difference-in-difference (DID) estimators. We found that the gross and selection effects of financial openness are positive, and significantly increase firms' exports by 27.5%. Moreover, the impact differs for various firms: in terms of scale, small and micro firms benefit the most, and in terms of industry, manufacturing firms achieve the highest growth. Additionally, foreign-owned banks reduce firms' transaction costs and production expenditures, while increasing their total factor productivity (TFP) and credit alternatives.

Keywords: Financial openness; Exports; Quasi-natural experiment; Foreign-owned bank (search for similar items in EconPapers)
JEL-codes: F39 G21 H32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001308

DOI: 10.1016/j.irfa.2023.102614

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