Financial constraints and the productivity–survival link: evidence from China’s firm-level data

We study how financial constraints influence the productivity–survival link, using data of Chinese industrial firms from 1998 through 2009. The analysis shows that financial constraints do not only play a negative role in firm survival, but also weaken the market selection against inefficient firms on average. We also find that the selection mechanism is ineffective for state-owned firms and large firms, and that financial constraints hinder the growth of firm productivity and market share.