Abstract
Small businesses are in general financially depressed; bank credits intended for consumption (here, credits from business owners' credit cards) may be switched to financing business operations, thereby enhancing small businesses' survival. By examining small enterprises in China with nationally representative data, this paper is among the first to provide direct evidence on the effects of credit card access on two aspects of small business dynamics: existing small businesses' survival (i.e., business exit) and households' decision to start new ones (i.e., business entry). We find that credit card access enhances informal small businesses' subsequent survival rates, and our IV estimations confirm the causality. We further find that this positive relationship is more pronounced among businesses with lower profitability, among businesses in lower digital finance inclusion regions, among aged businesses, and among businesses whose owners are risk averse or more financially knowledgeable. Regarding business entry, we find that credit card access contributes to households' propensity to start a formal business (i.e., a business in a formal organization form) but not an informal one.
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