Local financial development and constraints on domestic private-firm exports: Evidence from city commercial banks in China

Zhao, Chen; Poncet, Sandra; Xiong, Ruixiang

doi:10.1016/j.jce.2019.09.005

Cited by 54 publications

(16 citation statements)

References 45 publications

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“…The top six commercial banks' total credit assets were 72 trillion yuan at the end of 2019, with a balance of 2 trillion yuan in non-performing loans and a ratio of 2.69 percent. The actual results indicated that the deterioration of commercial banks' credit assets is greater than the China Banking Regulatory Commission's estimates (Chen et al, 2020). According to various Chinese financial authors, China's commercial banks' non-performing loan ratio is on a nosedive.…”

Section: Credit Risk In Chinese Commercial Banksmentioning

confidence: 95%

Revisiting credit risk and banks performance of China's commercial banks before and after Covid 19 pandemic

Twum

Agyemang

Sare

2022

J Corp Accounting Finance

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The effectiveness of the financial market is reflected in the financial crisis which mostly results in credit risk. The impact of credit risk in China is likely to affect the global economy since China is the fastest‐growing economy as well as the second‐best economy in the world in terms of gross domestic product. Using panel data for twenty‐eight listed commercial banks in China from 1990 to 2020, the study explored the relationship between credit risk and business performance. The authors utilized the Generalized Methods of Moments (GMM) as the primary estimator while the Pooled Mean Group (PMG) was used as a robust estimator. A negative and statistically significant relationship was found between non‐performing loan and return on equity, as well as loan loss provision and profitability of the bank. On the contrary, capital adequacy ratio revealed a positive and statistically significant relationship with bank performance. Credit growth on the other hand recorded positive but insignificant relationship with performance of banks. The findings will add up to existing literature on credit risk and business performance of commercial banks.

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Section: Credit Risk In Chinese Commercial Banksmentioning

confidence: 95%

Revisiting credit risk and banks performance of China's commercial banks before and after Covid 19 pandemic

Twum

Agyemang

Sare

2022

J Corp Accounting Finance

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“…Likewise, Kumarasamy and Singh (2018) rely on firm-level data from the World Bank Enterprises Survey and show that higher financial development translates into greater firms' ability to export. A recent evidence from Chinese private-firms by Chen et al (2019) reveals that the development of city commercial banks mitigates financial constraints and improves access to credit. Importantly, the authors find that domestic private-firms in financially-dependent sectors exhibit a higher share of exports.…”

Section: Literature Review Of Empirical Papersmentioning

confidence: 99%

The Nexus between Financial Development and Exports Performance: A Re-Assessment with the Structural Gravity Model

Mouanda-Mouanda

2022

Eur. j., econ.

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The aim of this paper is to re-examine the relationship between financial development and international trade within the structural gravity model. Unlike the previous literature, we implement an identification strategy that considers intra-national trade flows in addition to international trade data in order to deal with the issues of perfect collinearity and the multilateral resistances terms (MRTs). Using a sample of 64 countries and two data frameworks (cross-sectional and panel) and applying the OLS/2SLS estimator and the PPMLHDFE estimator, our findings support the promoting effect of financial indicators on exports of all manufacturing goods relative to domestic trade. This performance is disproportionately higher for final goods than intermediate inputs. Importantly, this research demonstrates the existence of the heterogeneous direct impact of financial development on international trade depending on the level of economic development and across industries.

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“…They documented that financial marketization significantly reduces the adverse effects of EXRV on exports. Similarly, another recent study by Chen et al (2020) examined whether the development of city commercial banks (CCBs) across China has enhanced the export performance of Chinese domestic private firms during the period 1997-2012. They found that improvements in financial market efficiency have positive impacts on export performance.…”

Section: Financial Development and Exportingmentioning

confidence: 99%

The exports–exchange rate volatility nexus in Pakistan: do financial constraints and financial development matter?

Rashid

Muneeb²,

Karim³

2021

IJOEM

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PurposeThis paper first examines how changes in the real effective exchange rate and its volatility affect the exporting activities of firms. Next, it investigates whether exchange rate volatility (EXRV) affects the export behavior of financially constrained and unconstrained firms differently. Finally, it examines the role of financial development in mitigating the effects of EXRV and financial constraints on firms' exports.Design/methodology/approachThe empirical analysis of the paper is based on a wide panel of Pakistani nonfinancial firms listed at the Pakistan Stock Exchange during the period 2001–2016. To mitigate the problem of endogeneity and to take into account the dynamic nature of the empirical model, the authors apply the robust two-step system-GMM estimator developed by Blundell and Bond (1998). To examine the role of credit constraints, firm-year observations are sorted as financially constrained and unconstrained based on the median value of three alternative measures: the liquidity ratio, the dividend payout ratio and the Whited and Wu (WW) index.FindingsThe results reveal that an increase in the real effective exchange rate has a positive and significant impact on firms' exports. However, the results show that the EXRV is significantly and negatively related to exporting decisions, suggesting firms considerably decrease their exports during periods of increased unpredictable variations in exchange rates. The findings also suggest that compared to financially constrained firms, the adverse effect of EXRV on exports is weaker for financially unconstrained firms. This finding implies that firm-level financial constraints unfavorably impact exports by making exporting more sensitive to the EXRV. Finally, the findings indicate that financial development not only positively affects firms' exports but also plays a vital role in declining the adverse effects of EXRV on firm-level exports. Specifically, the results show that financial development decreases the negative impact of EXRV on exports for both financially constrained and unconstrained firms. However, the moderating role of financial sector development is higher for financially unconstrained firms.Research limitations/implicationsNotwithstanding that the authors present robust and strong empirical evidence of the effects of EXRV on exporting and on the role of both firm-level financial constraints and financial sector development in formulating these effects, there are some limitations of the study. The authors use a single proxy for measuring financial sector development. However, one may construct an index for the financial sector developed using principal component analysis (PCA) by considering different measures of financial development. The authors use three different measures of financial constraints. Nonetheless, more sophisticated techniques such as switching regression can be used to endogenously determine whether firms are financially constrained. Moreover, an examination of the asymmetric effects of EXRV on exporting across different industries would also be worthwhile.Practical implicationsFrom a policy point of view, the results suggest that the development of the financial sector and the strategies to lessen credit constraints faced by firms will help in mitigating the adverse effects of the EXRV on the exporting behavior of firms in Pakistan. The findings also suggest that managers in financially constrained firms should apply appropriate hedging strategies to hedge exchange rate risks. Finally, the findings suggest that investors should take into consideration exchange rate dynamics and firms' financial constraints while investing in exporting firms' stocks.Social implicationsSince the findings suggest that financially constrained firms' exports are more exposed to EXRV, managers of such exporting firms are suggested to apply effective and suitable currency risk-minimizing hedging instruments for enhancing their exports. The government should also implement economic and financial policies in such a way that they should help in reducing volatilities of exchange rates and in turn, encouraging firms to export more. Definitely, any policy, at both government and firm level, favoring exporting and export-oriented growth will not only help in overcoming the problem of a persistent and wide trade deficit but also help society by providing more employment and investment opportunities.Originality/valueRecently, Pakistan has experienced significant declines in foreign reserves, persistent political unrest and enlarged trade deficits. All these have increased the uncertainty about the exchange rate. Therefore, it is valuable to know the EXRV effects on firms' exporting activities. Second, Pakistani firms face more financial constraints, and thus, the influence of financial constraints in formulating the volatility effects on exporting would be worth exploring. Finally, no research has yet taken place to scrutinize the role of financial development in mitigating the adverse effects of EXRV and financial constraints on exporting activities. This paper provides firsthand empirical evidence on the role of financial constraints and financial sector development in formulating the EXRV impacts on firm-level exports in Pakistan.

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Local financial development and constraints on domestic private-firm exports: Evidence from city commercial banks in China

Cited by 54 publications

References 45 publications

Revisiting credit risk and banks performance of China's commercial banks before and after Covid 19 pandemic

Revisiting credit risk and banks performance of China's commercial banks before and after Covid 19 pandemic

The Nexus between Financial Development and Exports Performance: A Re-Assessment with the Structural Gravity Model

The exports–exchange rate volatility nexus in Pakistan: do financial constraints and financial development matter?

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