Title: Direct and Indirect Effects of Financial Access on SMEs 

Speaker： Jing Cai, University of Maryland

Time: 21: 00 - 22:00 (Beijing Time, GMT+8), 24 May, 2021  

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Zoom ID: 9316789264

Password：790971

About the speaker

Jing Cai is an Assistant Professor in the Department of Agricultural and Resource Economics at the University of Maryland. She was an assistant professor of Economics at the University of Michigan before joining Maryland. She received her PhD from the University of California at Berkeley in 2012.  She is a Research Fellow at the National Bureau of Economic Research (NBER), an affiliate of the Bureau for Research and Economic Analysis of Development (BREAD), and an affiliated professor of the Abdul Latif Jameel Poverty Action Lab (J-PAL). She currently serves as the associate editor of the Journal of Development Economics and the Economic Development and Cultural Change. Her research areas are development economics, Chinese economy, and household finance. Her current research examines growth of micro-enterprises and SMEs, diffusion and impacts of financial innovations in developing countries, and impacts of tax incentives on firm behavior.

Abstract

We measure the direct and indirect effects of access to finance using a randomized experiment with 3,100 firms in 78 local markets in China, which created variation in firms’ access to a new loan product both within and across markets. Our estimates imply that: (1) Financial access has large positive direct effects. Providing access to a firm increases its revenue by 9 percent, and also significantly increases profits, employment, the number of clients and the use of trade credit. The new loan does not crowd out existing loans. (2) Financial access has large negative indirect effects. Providing access to all of a firm’s competitors in the local market reduces its revenue by 7 percent, and also significantly reduces profits, employment, the number of clients and the use of trade credit. (3) In a model matched to the data in which the indirect effect reflects business stealing, treating all firms in a market would generate—despite nearly offsetting direct and indirect effects on firms—sizeable welfare gains to consumers who benefit from competition.