Regional banks, financing constraints and manufacturing enterprises' total factor productivity: A quasi-natural experiment of China's city commercial banks

The literature shows that the financial system dominated by large national banks restricts enterprises' financing channels, leading to efficiency losses. In response, governments introduce different types of banks to address this issue. However, the literature overlooks the relationships among regional banks, financing constraints and manufacturing enterprises' productivity. We fill this gap by exploiting the China's unique policy of staggered rollout of city commercial banks across cities and using data from Chinese listed manufacturing enterprises over the period 1992 to 2022 to explore how regional banks affect productivity. We find that regional banks represented by city commercial banks in China significantly increase the manufacturing enterprises' total factor productivity by alleviating financing constraints, especially pronounced for state-owned enterprises, large enterprises, and well-established enterprises. Our research results emphasize the effectiveness of regional banks in promoting the development of the manufacturing industry and offer insights for sustainable economic development policies.