Property Law (Pl) and Export Product Quality : A Study from the Perspective of Financial Constraints

Property rights protection is crucial in controlling firms’ ability to manage financial constraints. This paper adapted the back-calculation method to measure the quality of Chinese export products through screening and merging data from China’s Industrial Firm Database and Chinese Custom Database. To establish the causal relationship, it constructed the Difference in Difference (DID) approach based on the quasi-natural experiment of the Property Law (PL) promulgated in 2007 to study the effect of the law on export quality by alleviating financial constraints. Our regression results from 2004 to 2013 show that after reforming the PL, the firm’s product quality has significantly improved. The law enhances the firm’s property protection mechanism and increases the types of security collateral and so on. The test results are also found robust in three different robustness tests. These test results and robustness tests suggest that property-rights protection strengthens a country’s international competitiveness by improving its export quality. In the end, mediated effect analysis confirmed that the PL effects on export product quality result from lessening the financial constraints enterprises face through alleviating both bank financing and generalized financing constraints