Government provided credit ratings and foreign sales: Evidence from China

Wei Yu, Jianping Pan, Rui Fan and Manjiao Yu

The Quarterly Review of Economics and Finance, 2025, vol. 99, issue C

Abstract: The existing literature pays much attention to the credit rating given by market-oriented credit rating agencies, but largely ignores the effect of government-oriented credit rating. Recently, State Taxation Administration of China gives a government provided credit rating for all the Chinese firms. This practice provides a valuable context for us to shed light on the theoretical void of credit ratings given by the government. Using a hand-collected database from China, we find that A-level rated firms acquire nearly 69 % more foreign sales than non-A-level rated firms. Our findings support information channel, trust channel, government efficiency channel and financing constraints channel. Furthermore, the impact of government given credit ratings on a firm’s foreign sales is stronger when firms locate in a province with lower intensity of international trade, when firms are smaller and when firms hire less directors with oversea background. Finally, we examine how the domestic market interplays with the foreign market. We find that domestic sales will also increase but the magnitude is smaller. Overall, the credit rating given by the government could help a firm penetrate into the global market when most firms in a country are not covered by international credit rating agencies.

Keywords: Government Provided Credit Ratings; Foreign Sales; Social Trust; Information Transparency; Financing Constraints (search for similar items in EconPapers)
JEL-codes: G28 G30 H20 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976924001649
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:99:y:2025:i:c:s1062976924001649

DOI: 10.1016/j.qref.2024.101958

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().