The productivity of industrial firms and financial efficiency in China

抄録

This paper examines the efficiency of two types of financial sources used in China – trade credit and bank loans – by measuring their impact on firm productivity using firm-level panel data. We first analyzed the relationship between productivity and the financial sources and found that enterprises experienced productivity gains as a result of using more trade credit, but they experienced productivity losses as a result of using more bank loans. Then, the effect of these sources according to firm ownership structure and size relative to the rest of the industry were analyzed. We also found that for large enterprises, both trade credit and bank loans had significant positive effects on their productivity growth. For small and medium enterprises (SMEs), however, regardless of the type of financial source used, the larger their reliance on them, the worse their productivity. Moreover, the results show that state owned enterprises might experience lower productivity because of their debts to banks.