This article clarifies the relationship between financial frictions, production line position and firm-level performance in China. We develop a stylized model in a partial equilibrium setting and incorporate financial frictions into the sequential production of firms. We use a sample of unbalanced panel data ranging from 19,929 firms in 2000 to 61,109 firms in 2013, by merging China's Customs Dataset, Chinese manufacturing firm dataset and global input-output tables between 2000 and 2013. In the presence of lower financial constraints, we find that: first, the firm's span of production stages becomes wider by its imports becoming more upstream and its exports becoming more downstream, and its average position becomes relatively downstream; Second, it tends to decrease debt financing relative to equity financing and obtains higher profits.
How firms position and perform in global value chains with financial frictions: evidence from China
Della Posta, Pompeo
2024-01-01
Abstract
This article clarifies the relationship between financial frictions, production line position and firm-level performance in China. We develop a stylized model in a partial equilibrium setting and incorporate financial frictions into the sequential production of firms. We use a sample of unbalanced panel data ranging from 19,929 firms in 2000 to 61,109 firms in 2013, by merging China's Customs Dataset, Chinese manufacturing firm dataset and global input-output tables between 2000 and 2013. In the presence of lower financial constraints, we find that: first, the firm's span of production stages becomes wider by its imports becoming more upstream and its exports becoming more downstream, and its average position becomes relatively downstream; Second, it tends to decrease debt financing relative to equity financing and obtains higher profits.File | Dimensione | Formato | |
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AEL - How firms position and perform in global value chains with financial frictions evidence from China.pdf
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AEL- GVCs and financial frictions.pdf
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Preprint - AEL Appendix_How firms position and perform in GVCs.pdf
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