Do productive firms get external finance? Evidence from Chinese listed manufacturing firms

Due to information asymmetry problem in financial markets good quality firms often find it difficult to prove to external finance providers about their true quality and to distinguish themselves from bad quality firms. We argue that instead of sending indirect signals to financial market good qualit...

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Main Authors: Chen, Minjia, Matousek, Roman
Format: Article
Language:English
Published: Elsevier Inc. 2020
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Online Access:http://repo.uum.edu.my/27292/1/IRFA%2067%202019%201%2047.pdf
http://repo.uum.edu.my/27292/
http://doi.org/10.1016/j.irfa.2019.101422
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spelling my.uum.repo.272922020-07-29T07:31:12Z http://repo.uum.edu.my/27292/ Do productive firms get external finance? Evidence from Chinese listed manufacturing firms Chen, Minjia Matousek, Roman HC Economic History and Conditions Due to information asymmetry problem in financial markets good quality firms often find it difficult to prove to external finance providers about their true quality and to distinguish themselves from bad quality firms. We argue that instead of sending indirect signals to financial market good quality firms could focus on improving their productivity to obtain external finance. Besides relying solely on firms' balance sheet information external finance providers using firms' TFP or labour productivity information would have a true knowledge of firms' efficiency and risk. Overall, using a panel of 1591 Chinese listed manufacturing firms between 2003 and 2016 we find that productivity measured by TFP or labour productivity is statistically and economically important and positive in determining firms' external finance, i.e. total leverage, new issue of equity and long-term debt. We find that productivity is helpful for firms to raise new equity finance, but only some weak results for total leverage and long-term debt. Such results hold for both the whole sample and private firm sample. We also find that large and/or old firms and exporting firms are able to make better use of their productivity to gain external finance than their respective counterparts, i.e. small young firms and non-exporting firms. The causality of the regression results is also confirmed by difference-in-difference tests using an exogenous industrial policy shock. Elsevier Inc. 2020 Article PeerReviewed application/pdf en http://repo.uum.edu.my/27292/1/IRFA%2067%202019%201%2047.pdf Chen, Minjia and Matousek, Roman (2020) Do productive firms get external finance? Evidence from Chinese listed manufacturing firms. International Review of Financial Analysis, 67. pp. 1-47. ISSN 10575219 http://doi.org/10.1016/j.irfa.2019.101422 doi:10.1016/j.irfa.2019.101422
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutional Repository
url_provider http://repo.uum.edu.my/
language English
topic HC Economic History and Conditions
spellingShingle HC Economic History and Conditions
Chen, Minjia
Matousek, Roman
Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
description Due to information asymmetry problem in financial markets good quality firms often find it difficult to prove to external finance providers about their true quality and to distinguish themselves from bad quality firms. We argue that instead of sending indirect signals to financial market good quality firms could focus on improving their productivity to obtain external finance. Besides relying solely on firms' balance sheet information external finance providers using firms' TFP or labour productivity information would have a true knowledge of firms' efficiency and risk. Overall, using a panel of 1591 Chinese listed manufacturing firms between 2003 and 2016 we find that productivity measured by TFP or labour productivity is statistically and economically important and positive in determining firms' external finance, i.e. total leverage, new issue of equity and long-term debt. We find that productivity is helpful for firms to raise new equity finance, but only some weak results for total leverage and long-term debt. Such results hold for both the whole sample and private firm sample. We also find that large and/or old firms and exporting firms are able to make better use of their productivity to gain external finance than their respective counterparts, i.e. small young firms and non-exporting firms. The causality of the regression results is also confirmed by difference-in-difference tests using an exogenous industrial policy shock.
format Article
author Chen, Minjia
Matousek, Roman
author_facet Chen, Minjia
Matousek, Roman
author_sort Chen, Minjia
title Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
title_short Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
title_full Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
title_fullStr Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
title_full_unstemmed Do productive firms get external finance? Evidence from Chinese listed manufacturing firms
title_sort do productive firms get external finance? evidence from chinese listed manufacturing firms
publisher Elsevier Inc.
publishDate 2020
url http://repo.uum.edu.my/27292/1/IRFA%2067%202019%201%2047.pdf
http://repo.uum.edu.my/27292/
http://doi.org/10.1016/j.irfa.2019.101422
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score 13.159267