Agglomeration and Firm Financing: Evidence from High and New Technology Chinese Firms in the Pearl River Delta. Issue 2 (4th March 2023)

• Record Type: Journal Article
• Authors: Shu, Qianfei
• Is Part Of: Chinese economy. Volume 56:Issue 2(2023)
• Page Start: 124
• Page End: 146
• Publication Date: 2023-03-04
• Subjects: agglomeration -- China -- financing -- high and new technology industry; G32 -- O14 -- R11; China -- Economic conditions -- Periodicals; Chine -- Conditions économiques -- Périodiques; 330.951
• DOI: 10.1080/10971475.2022.2096807
• Languages: English
• ISSNs: 1097-1475

Abstract

Abstract: Using firm-level panel data from 1998 to 2015 for high and new technology firms in the Pearl River Delta in China, I investigated the effect of policy-directed industrial agglomeration on firm financing (trade credit and bank loan). I find that small and young firms are more likely to utilize trade credit, while large and old-established firms tend to rely on bank loans. I also find that the agglomeration effect is more remarkable for foreign and private-owned firms both in trade credit and bank loans, while state-owned firms fail to benefit from the effect of industrial agglomeration. These findings suggest that in China, policy-oriented industrial agglomeration plays an important role in alleviating financial constraints. Additionally, endogeneity issue is addressed by using two-stage estimation with instrumental variable and system generalized method of moments (GMM) estimation.