Industry Clustering and Financial Constraints
A Reinterpretation Based on Fixed Asset Liquidation
Bibliographic Data
| ID | 4757555 |
|---|---|
| Authors | Rui Mao (0000-0003-1310-0839, Zhejiang University, corresponding author) |
| Year | 2016 |
| Volume | 64 |
| Issue | 4 |
| Pages | 795-821 |
| Publication date | 2016-07-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Economic Development and Cultural Change (JOURNAL) |
| Journal identifiers | ISSN: 0013-0079 • E-ISSN: 1539-2988 |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/686582 |
| OpenAlex | W2343504335 |
| Language | EN |
| References cited | 29 |
This article reinvestigates the effects of industry clustering on financial constraints, with a focus on the firm-bank interplay. In a model featuring asymmetrical information, firms pledge fixed assets as collateral for bank loans. The amount of borrowing is limited by the collateral’s market value. By increasing the number of bidders in the case of liquidation auctions, industry clustering raises the collateral’s market value and relaxes financial constraints. This effect is weaker if firms tend to receive a synchronized negative shock but is stronger if they tend to exhibit high valuation of fixed assets. These predictions are confirmed by China’s firm-level survey data. In particular, industry clustering reduces investment–cash flow sensitivity, and the effect is larger in industries with low correlations between sales values and GNP, large coefficients of variation of sales growth, and a large share of fixed assets in total assets. These conclusions are robust to model specifications and can be extended to analyses on various symptoms of financial constraints. They are also valid considering the issue of endogeneity
Business · Cash flow · Collateral · Credit rationing · Econometrics · Economics · Endogeneity · Fixed asset · Interest rate · Loan · Microeconomics · Monetary economics · Pledge · Production (economics) · Valuation (finance) · Volatility (finance) · Banking stability, regulation, efficiency · Corporate Finance and Governance · Finance · Working Capital and Financial Performance
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Financing Constraints and Corporate Investment
Corporate financing and investment decisions when firms have information that investors do not have
The Financial Accelerator and the Flight to Quality
Financial constraints in China
Heterogeneous firms, agglomeration and economic geography
Clustering and Industrialization
The Effectiveness of Law, Financial Development, and Economic Growth in an Economy of Financial Repression
Internal finance and growth
Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing
Money and Capital in Economic Development
Financial Deepening in Economic Development
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| Citation velocity | historical |
|---|---|
| Highly cited | No |