Financial Constraints and the Extensive and Intensive Margin of Firm Exports: Panel Data Evidence from China

Some theoretical work suggests credit constraints to hamper exports while other work suggests that they deter firms' sales at large. Hence, credit constraints might reduce the export–sales ratio or not. This paper assesses the role of credit constraints for the export–sales ratio at the firm level. We explore this hypothesis empirically, using cross-section and panel data on Chinese enterprises compiled by the National Bureau of Statistics of China. We approximate credit constraints by a firm's ratio of liquid debt to sales and, alternatively, the ratio of liquid assets to total assets. In particular, we estimate the impact of these financial fundamentals on the extensive and the intensive margins of firm-level exports in two-part fractional response models. Fixed effects panel regressions point to a negative relationship between export–sales ratios and credit constraints only at the extensive margin.