Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China

Robert Feenstra, Zhiyuan Li () and Miaojie Yu

The Review of Economics and Statistics, 2014, vol. 96, issue 4, 729-744

Abstract: This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive compatibility, banks lend below the amount that firms need for optimal production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms. In our application to Chinese firms, we find that the credit constraint is more stringent as a firm's export share grows, as the time to ship for exports is lengthened, and as there is greater dispersion of firms' productivities, reflecting more incomplete information. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: export; credit constraint; China; domestic; bank; firm; productivity (search for similar items in EconPapers)
JEL-codes: F10 F21 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (279)

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Working Paper: Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China (2011)
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