The impact of banking competition on firm total factor productivity

Figures & data

Table 1. Variable definitions.

Variable	Definition
TFP	The primary estimator for firm-level TFP.
Labour	The logarithm of added value of per worker in the firm (1000RMB).
Allocation	The alternative estimator for capital allocation efficiency.
State_bank	The ratio of the big four state-owned bank branches to commercial bank branches.
City_bank	The ratio of city commercial bank branches to commercial bank branches.
Size	Ln(Assets) (1000RMB).
Leverage	The firm’s debt divided by assets.
Manage	Ln(Administrative expenses) (1000RMB).
Current	The ratio of current assets to assets.
K_L	Ln(The firm’s capital to labour ratio) (1000RMB per person).
ROA	The ratio of the firm’s profit to assets.
Export	The proportion of the firm’s export value to sales value.
Age	Ln(The number of years the firm has existed).
Industry	The Herfindahl index of sales, based on sales in industries with four-digit SIC codes.
Financing	Equal to 1 when the firm has external financing and to 0 otherwise.
Debt_cost	The ratio of interest expense to debt.

Source: The authors.

Table 2. Summary statistics.

Variables	Min	p25	Median	Mean	p75	Max	S.D
TFP	−0.760	−0.124	−0.011	−0.007	0.114	0.816	0.296
Labour	11.508	44.361	77.886	160.995	152.765	1342.42	18876.3
Allocation	−0.289	0.140	0.213	0.214	0.302	0.595	0.161
State_bank	0.012	0.386	0.495	0.516	0.642	1.000	0.202
City_bank	0.000	0.000	0.056	0.067	0.092	0.389	0.083
Size	1992	11469	27891	158611	77555	2018614	1480230
Leverage	0.025	0.345	0.547	0.537	0.733	1.000	0.257
Manage	30.00	584.00	1591.00	7838.14	4500.00	89175.0	91993.5
Current	0.046	0.386	0.583	0.558	0.752	0.974	0.245
K_L	1.750	21.943	52.091	148.102	118.289	1211.10	2975.62
ROA	−0.105	0.013	0.052	0.111	0.139	0.895	0.176
Export	0.000	0.000	0.000	0.191	0.177	1.000	0.345
Age	1.000	5.000	8.000	9.979	12.000	113.000	8.591
Industry	0.001	0.005	0.011	0.033	0.030	0.412	0.073
Financing	0.000	0.000	1.000	0.637	1.000	1.000	0.481
Debt_cost	0.000	0.000	0.877	2.474	3.149	26.029	5.369

Note: The summary statistics of variables Labour, Size, Manage, K_L, and Age are the original values. The summary statistics of variables Debt_cost are percentages.

Source: The authors.

Table 3. Baseline regressions.

	(1)	(2)	(3)	(4)	(5)	(6)
State_bank	−0.026*** (0.002)				−0.009*** (0.002)
City_bank		0.040*** (0.004)				0.035*** (0.009)
Size			0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)
Leverage			−0.018*** (0.002)	−0.018*** (0.002)	−0.018*** (0.002)	−0.018*** (0.002)
Manage			−0.018*** (0.007)	−0.018*** (0.007)	−0.018*** (0.007)	−0.018*** (0.007)
Current			−0.005*** (0.002)	−0.005*** (0.002)	−0.005*** (0.002)	−0.005*** (0.002)
K_L			0.003*** (0.000)	0.003*** (0.000)	0.003*** (0.000)	0.003*** (0.000)
ROA			0.371*** (0.002)	0.371*** (0.002)	0.371*** (0.002)	0.373*** (0.002)
Export			0.004*** (0.002)	0.004*** (0.002)	0.004*** (0.002)	0.004*** (0.002)
Age			0.005*** (0.001)	0.005*** (0.001)	0.005*** (0.001)	0.005*** (0.001)
Industry			0.014*** (0.003)	0.014*** (0.003)	0.013*** (0.003)	0.014*** (0.003)
Constant	0.009*** (0.001)	−0.007*** (0.000)	−0.090*** (0.006)	−0.090*** (0.006)	−0.085*** (0.006)	−0.096*** (0.006)
Firm FE	Yes	Yes	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	1052608	1052608	1052608	1052608	1052608	1052608
R^2	0.540	0.541	0.607	0.608	0.608	0.610

Note: Standard errors are reported in brackets. ***, **, and * denote the significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.

Figure 1. The role of financial constraints in banking competition affecting firm TFP.

Source: The authors.

Table 4. Impact mechanism test results.

	(1)	(2)	(3)	(4)	(5)	(6)
Dependent variable	Financing		Leverage		Debt_cost
State_bank	1.436*** (0.179)		1.329*** (0.186)		0.070 (0.055)
City_bank		−18.227*** (2.069)		−15.393*** (0.659)		−0.719*** (0.194)
Size	−0.140*** (0.033)	−0.093*** (0.032)	−0.510*** (0.049)	−0.510*** (0.049)	0.283*** (0.014)	0.291*** (0.014)
Leverage	−2.369*** (0.143)	−2.204*** (0.141)			0.415*** (0.035)	0.432*** (0.035)
Manage	−3.312*** (0.746)	−1.269* (0.719)	4.825*** (0.475)	4.650*** (0.476)	0.232* (0.140)	0.242* (0.140)
Current	−0.736*** (0.163)	−0.150 (0.159)	−0.937*** (0.129)	−0.944*** (0.130)	0.062 (0.038)	0.065* (0.038)
K_L	−0.392*** (0.037)	−0.334*** (0.037)	−0.043 (0.032)	−0.047 (0.032)	0.055*** (0.009)	0.053*** (0.009)
ROA	0.853*** (0.161)	0.880*** (0.150)	−8.231*** (0.159)	−8.379*** (0.160)	2.752*** (0.047)	2.799*** (0.047)
Export	0.957*** (0.093)	0.868*** (0.095)	0.327*** (0.120)	0.335*** (0.121)	0.009 (0.035)	0.012 (0.036)
Age	−0.223*** (0.049)	−0.082* (0.047)	0.091 (0.062)	0.055 (0.062)	0.086*** (0.018)	0.085*** (0.018)
Industry	−1.945*** (0.510)	−1.897*** (0.498)	0.680*** (0.261)	0.682*** (0.255)	0.012 (0.078)	0.014 (0.078)
Constant	−24.301*** (0.339)	−20.307*** (0.289)	59.542*** (0.487)	61.417*** (0.480)	−1.075*** (0.145)	−1.171*** (0.143)
Firm FE	Yes	Yes	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
lnsig2u	5.046*** (0.006)	4.677*** (0.006)
Obs.	1052608	1052608	1052608	1052608	1052608	1052608
R^2	0.167	0.166	0.706	0.707	0.498	0.499

Note: Standard errors are reported in brackets. ***, **, and * denote the significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.

Table 5. Banking competition and TFP: the role of firm size.

	(1)	(2)	(3)	(4)	(5)	(6)
Group	Small firms		Medium firms		Large firms
State_bank	−0.017*** (0.003)		−0.004 (0.005)		0.004 (0.012)
City_bank		0.041*** (0.010)		0.033* (0.019)		0.037 (0.046)
Size	0.007*** (0.001)	0.008*** (0.001)	0.007*** (0.001)	0.007*** (0.001)	0.002 (0.003)	0.002 (0.003)
Leverage	−0.021*** (0.002)	−0.021*** (0.002)	−0.012*** (0.003)	−0.012*** (0.004)	0.013 (0.009)	0.012 (0.009)
Manage	−0.048*** (0.009)	−0.050*** (0.009)	0.001 (0.014)	0.000 (0.014)	−0.058 (0.039)	−0.057 (0.039)
Current	−0.013*** (0.002)	−0.013*** (0.002)	0.002 (0.004)	0.002 (0.004)	0.002 (0.010)	0.002 (0.010)
K_L	−0.002*** (0.001)	−0.002*** (0.001)	0.005*** (0.001)	0.005*** (0.001)	0.020*** (0.002)	0.020*** (0.002)
ROA	0.336*** (0.002)	0.338*** (0.002)	0.465*** (0.006)	0.466*** (0.006)	0.654*** (0.019)	0.649*** (0.019)
Export	0.006*** (0.002)	0.006*** (0.002)	−0.001 (0.003)	−0.000 (0.003)	0.010 (0.009)	0.009 (0.009)
Age	0.005*** (0.001)	0.005*** (0.001)	0.007*** (0.002)	0.007*** (0.002)	0.010** (0.004)	0.011*** (0.004)
Industry	0.014*** (0.004)	0.015*** (0.004)	0.020** (0.008)	0.020** (0.008)	−0.033 (0.021)	−0.032 (0.021)
Constant	−0.092*** (0.007)	−0.108*** (0.007)	−0.167*** (0.016)	−0.172*** (0.016)	−0.193*** (0.048)	−0.190*** (0.047)
Firm FE	Yes	Yes	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	696091	696091	297385	297385	45377	45377
R^2	0.637	0.640	0.574	0.574	0.638	0.640

Note: Standard errors are reported in brackets. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.

Table 6. Banking competition and TFP: the role of ownership.

	(1)	(2)	(3)	(4)	(5)	(6)
Group	Private firms		SOEs		Foreign firms
State_bank	−0.016*** (0.003)		−0.013 (0.024)		0.001 (0.007)
City_bank		0.033*** (0.012)		−0.058 (0.095)		0.014 (0.028)
Size	0.005*** (0.001)	0.005*** (0.001)	0.012 (0.008)	0.014 (0.009)	0.006*** (0.002)	0.007*** (0.002)
Leverage	−0.018*** (0.002)	−0.018*** (0.002)	−0.020 (0.019)	−0.017 (0.019)	−0.014*** (0.005)	−0.014*** (0.005)
Manage	−0.041*** (0.011)	−0.042*** (0.011)	−0.071 (0.043)	−0.076* (0.043)	0.011 (0.017)	0.013 (0.017)
Current	−0.013*** (0.002)	−0.013*** (0.002)	−0.022 (0.020)	−0.013 (0.021)	−0.005 (0.005)	−0.005 (0.005)
K_L	0.001 (0.001)	0.001 (0.001)	0.004 (0.005)	0.005 (0.005)	0.000 (0.001)	−0.000 (0.001)
ROA	0.356*** (0.003)	0.358*** (0.003)	0.433*** (0.032)	0.467*** (0.033)	0.418*** (0.007)	0.422*** (0.007)
Export	0.007*** (0.003)	0.008*** (0.003)	−0.041 (0.035)	−0.032 (0.035)	0.004 (0.003)	0.004 (0.003)
Age	0.006*** (0.001)	0.006*** (0.001)	0.001 (0.008)	0.001 (0.008)	0.004 (0.003)	0.005 (0.003)
Industry	0.012** (0.005)	0.012** (0.005)	0.009 (0.029)	0.007 (0.029)	0.016 (0.010)	0.018* (0.011)
Constant	−0.110*** (0.009)	−0.123*** (0.009)	−0.114 (0.093)	−0.149 (0.093)	−0.089*** (0.022)	−0.101*** (0.022)
Firm FE	Yes	Yes	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	541991	541991	19257	19257	204208	204208
R^2	0.649	0.649	0.593	0.592	0.623	0.625

Note: Standard errors are reported in brackets. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.

Table 7. The results of the robustness examination.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Dependent variable	Labour		Allocation		TFP
State_bank	−0.073*** (0.006)		−0.024*** (0.001)		−0.065*** (0.008)
City_bank		0.256*** (0.021)		0.077*** (0.004)		0.005 (0.017)
State_bank^2					0.051*** (0.007)
City_bank^2						0.093** (0.046)
Branches							0.004*** (0.001)
Cross								0.208*** (0.021)
Size	0.041*** (0.002)	0.041*** (0.002)	−0.011*** (0.000)	−0.010*** (0.000)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)
Leverage	0.016*** (0.004)	0.016*** (0.004)	−0.038*** (0.001)	−0.039*** (0.001)	−0.018*** (0.002)	−0.018*** (0.002)	−0.018*** (0.002)	−0.018*** (0.002)
Manage	−0.286*** (0.015)	−0.281*** (0.015)	0.049*** (0.003)	0.047*** (0.003)	−0.017** (0.007)	−0.018*** (0.007)	−0.018*** (0.007)	−0.018*** (0.007)
Current	0.111*** (0.004)	0.111*** (0.004)	0.093*** (0.001)	0.092*** (0.001)	−0.005*** (0.002)	−0.005*** (0.002)	−0.005*** (0.002)	−0.005*** (0.002)
K_L	0.102*** (0.001)	0.102*** (0.001)	0.022*** (0.000)	0.022*** (0.000)	0.003*** (0.000)	0.003*** (0.000)	0.003*** (0.000)	0.003*** (0.000)
ROA	1.349*** (0.005)	1.360*** (0.005)	0.029*** (0.001)	0.029*** (0.001)	0.371*** (0.002)	0.373*** (0.002)	0.372*** (0.002)	0.373*** (0.002)
Export	−0.027*** (0.004)	−0.027*** (0.004)	0.023*** (0.001)	0.023*** (0.001)	0.004*** (0.002)	0.004*** (0.002)	0.004*** (0.002)	0.004*** (0.002)
Age	0.022*** (0.002)	0.023*** (0.002)	−0.002*** (0.000)	−0.002*** (0.000)	0.005*** (0.001)	0.005*** (0.001)	0.005*** (0.001)	0.005*** (0.001)
Industry	0.007 (0.009)	0.007 (0.009)	0.005*** (0.002)	0.006*** (0.002)	0.013*** (0.003)	0.014*** (0.003)	0.013*** (0.003)	0.014*** (0.003)
Constant	3.409*** (0.016)	3.352*** (0.016)	0.214*** (0.003)	0.194*** (0.003)	−0.071*** (0.007)	−0.095*** (0.006)	−0.057*** (0.009)	−0.094*** (0.006)
Firm FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Obs.	1052608	1052608	1052608	1052608	1052608	1052608	1052608	1052608
R^2	0.762	0.762	0.416	0.422	0.608	0.610	0.608	0.610

Note: The dependent variable is Labour in columns (1) and (2), Allocation in columns (3) and (4), and TFP in columns (5) to (8). Standard errors are reported in brackets. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.

Table 8. The results of the robustness examination.

	(1)	(2)	(3)	(4)
Group	Young firms		Old firms
State_bank	−0.009*** (0.004)		−0.013*** (0.004)
City_bank		0.047*** (0.013)		0.023* (0.013)
Size	0.013*** (0.001)	0.013*** (0.001)	0.002** (0.001)	0.003*** (0.001)
Leverage	−0.013*** (0.002)	−0.013*** (0.002)	−0.019*** (0.002)	−0.019*** (0.002)
Manage	−0.100*** (0.010)	−0.099*** (0.010)	0.027*** (0.010)	0.027*** (0.010)
Current	−0.011*** (0.002)	−0.011*** (0.002)	−0.009*** (0.003)	−0.008*** (0.003)
K_L	−0.004*** (0.001)	−0.004*** (0.001)	0.004*** (0.001)	0.004*** (0.001)
ROA	0.363*** (0.003)	0.364*** (0.003)	0.374*** (0.003)	0.376*** (0.004)
Export	0.007*** (0.002)	0.007*** (0.002)	0.002 (0.002)	0.002 (0.002)
Age	0.005*** (0.001)	0.006*** (0.001)	0.003* (0.002)	0.003* (0.002)
Industry	0.010** (0.004)	0.011** (0.005)	0.019*** (0.005)	0.021*** (0.005)
Constant	−0.155*** (0.009)	−0.166*** (0.008)	−0.070*** (0.011)	−0.083*** (0.011)
Firm FE	Yes	Yes	Yes	Yes
Region FE	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes
Obs.	526302	526302	526302	526302
R^2	0.636	0.639	0.616	0.617

Note: Standard errors are reported in brackets. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively.

Source: The authors.