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.
2024
Hu, Wenqi; Della Posta, Pompeo
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11568/1253187
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