Abstract: Different types of financial constraints may led to different choice of enterprises on their product’s quality. The existing literatures have researched the total effects of financial constraints on quality, but haven’t considered the different structure of financial market. Based on an enterprise survey with random sampling, this paper studies the different impacts of credit constraints on product quality. It is indicated that credit constraints from informal financial markets have a significant positive influence on product quality, while credit constraints from formal ones have a significant negative influence on it. It is suggested that the government should promote their informal finance service for domestic private firms, relieve their financial pressures and restrain their quality behaviors at the same time, thus improve their product quality at last. Moreover, the government should regulate the informal financial markets to promote the real economic development.
Key words: Credit constraints Product quality Enterprise survey data Heterogeneity