Financial openness and firm exports: Evidence from Foreign-owned Banks in China

C.F. Lyu*, Z.H. Xiao, Y. Pu*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


Firms involved in international trade require an active and efficient financial market to facilitate their credit services and this is enhanced by financial openness. This study identified the impact of financial openness on Chinese firms' exports by 386 foreign-owned banks in China from 1996 to 2019 as a quasi-natural experiment. We constructed an estimation technique that combines the parallel trend test (PTT) and propensity score matching (PSM) with difference-in-difference (DID) estimators. We found that the gross and selection effects of financial openness are positive, and significantly increase firms' exports by 27.5%. Moreover, the impact differs for various firms: in terms of scale, small and micro firms benefit the most, and in terms of industry, manufacturing firms achieve the highest growth. Additionally, foreign-owned banks reduce firms' transaction costs and production expenditures, while increasing their total factor productivity (TFP) and credit alternatives.
Original languageEnglish
Article number102614
Number of pages13
JournalInternational Review of Financial Analysis
Publication statusPublished - 1 May 2023
Externally publishedYes

JEL classifications

  • g21 - "Banks; Depository Institutions; Micro Finance Institutions; Mortgages"
  • f39 - International Finance: Other
  • h32 - Fiscal Policies and Behavior of Economic Agents: Firm


  • Financial openness
  • Exports
  • Quasi -natural experiment
  • Foreign -owned bank
  • COST

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