EXPORT LIBERALIZATION AND EXPORTERS' LEVERAGE: EVIDENCE FROM CHINA'S WTO ACCESSION

This paper investigates the effect of export liberalization on exporters' financial leverage. With the data on Chinese exporter leverage around World Trade Organization (WTO) China's accession, we identify a negative causal effect of export liberalization, removal of the trade policy uncertainty as an exogenous shock, on exporter's leverage using a difference-in-difference approach. The results are robust under a series of tests. We also examine the heterogeneous effects across firm types and across locations. These effects primarily concentrate on private enterprises, foreign-invested enterprises, companies located in the eastern regions and processing trade enterprises. State-owned enterprises, businesses in western regions and general trade enterprises are not significantly affected. Further analyses reveal that export liberalization also reduces the industry financial leverage dispersion across firms. The main mechanism is that export liberalization reduces exporters' financing constraints.