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Article: Finance and Firm Volatility: Evidence from Small Business Lending in China
Title | Finance and Firm Volatility: Evidence from Small Business Lending in China |
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Authors | |
Keywords | FinTech credit e-commerce microcredit firm volatility regression discontinuity design microfinance |
Issue Date | 2021 |
Publisher | INFORMS. The Journal's web site is located at http://mansci.pubs.informs.org |
Citation | Management Science, 2021, Epub 2021-03-02 How to Cite? |
Abstract | The online trading platform Alibaba provides financial technology (FinTech) credit for millions of micro, small, and medium-sized enterprises (MSMEs). Using a novel data set of daily sales and an internal credit score threshold that governs the allocation of credit, we apply a fuzzy regression discontinuity design (RDD) to explore the causal effect of credit access on firm volatility. We find that credit access significantly reduces firm sales volatility and that the effect is stronger for firms with fewer alternative sources of financing. We further look at firm exit probability and find that firms with access to FinTech credit are less likely to go bankrupt or exit the business in the future. Additional channel tests reveal that firms with FinTech credit invest more in advertising and product/sector diversification, particularly during business downturns, which serves as effective mechanisms through which credit access reduces firm volatility. Overall, our findings contribute to a better understanding of the role of FinTech credit in MSMEs. |
Persistent Identifier | http://hdl.handle.net/10722/297662 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Chen, T | - |
dc.contributor.author | Huang, Y | - |
dc.contributor.author | Lin, C | - |
dc.contributor.author | Sheng, Z | - |
dc.date.accessioned | 2021-03-23T04:20:02Z | - |
dc.date.available | 2021-03-23T04:20:02Z | - |
dc.date.issued | 2021 | - |
dc.identifier.citation | Management Science, 2021, Epub 2021-03-02 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/297662 | - |
dc.description.abstract | The online trading platform Alibaba provides financial technology (FinTech) credit for millions of micro, small, and medium-sized enterprises (MSMEs). Using a novel data set of daily sales and an internal credit score threshold that governs the allocation of credit, we apply a fuzzy regression discontinuity design (RDD) to explore the causal effect of credit access on firm volatility. We find that credit access significantly reduces firm sales volatility and that the effect is stronger for firms with fewer alternative sources of financing. We further look at firm exit probability and find that firms with access to FinTech credit are less likely to go bankrupt or exit the business in the future. Additional channel tests reveal that firms with FinTech credit invest more in advertising and product/sector diversification, particularly during business downturns, which serves as effective mechanisms through which credit access reduces firm volatility. Overall, our findings contribute to a better understanding of the role of FinTech credit in MSMEs. | - |
dc.language | eng | - |
dc.publisher | INFORMS. The Journal's web site is located at http://mansci.pubs.informs.org | - |
dc.relation.ispartof | Management Science | - |
dc.subject | FinTech credit | - |
dc.subject | e-commerce microcredit | - |
dc.subject | firm volatility | - |
dc.subject | regression discontinuity design | - |
dc.subject | microfinance | - |
dc.title | Finance and Firm Volatility: Evidence from Small Business Lending in China | - |
dc.type | Article | - |
dc.identifier.email | Lin, C: chenlin1@hku.hk | - |
dc.identifier.authority | Lin, C=rp01808 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/mnsc.2020.3942 | - |
dc.identifier.hkuros | 321761 | - |
dc.identifier.volume | Epub 2021-03-02 | - |
dc.identifier.isi | WOS:000773341100005 | - |
dc.publisher.place | United States | - |