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Firms' leverage and export market participation: Evidence from South Korea

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  • KIM(KILF), Haeng-Sun

Abstract

To understand why some firms export while others do not, it is necessary to understand major determinants which lead some firms to engage in exporting. A large base of empirical literature provides evidence that firms which trade are systematically different from those which do not trade in size, productivity, and the involvement of multinational corporations. In this paper, we introduce a financial dimension as an additional source of firm heterogeneity to understand export market participation, and examine how the impact of leverage on firms’ exporting decisions varies depending on financial constraints, using a panel of 3353 Korean manufacturing firms over the period 1994–2011. We find that leverage for financially-constrained firms is negatively associated with the probability of exporting while leverage for financially-unconstrained is not. Also, we find that in the sample of financially-constrained firms, future exporters have higher leverage before they begin to export, while in the sample of financially-unconstrained firms, firms with ex-ante lower leverage self-select to export.

Suggested Citation

  • KIM(KILF), Haeng-Sun, 2016. "Firms' leverage and export market participation: Evidence from South Korea," International Economics, Elsevier, vol. 148(C), pages 41-58.
    • Handle: RePEc:eee:inteco:v:148:y:2016:i:c:p:41-58
    DOI: 10.1016/j.inteco.2016.06.002
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    Cited by:

    1. Mojdeh , Zahra & Tehranchian , Amir Mansour & Jafari Samimi , Ahmad & Rasekhi , Saeed, 2020. "Analyzing the Impact of Leverage Rate on Export Survival: The Case of Iranian Firms," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(1), pages 25-34, January.

    More about this item

    Keywords

    F14; G32; D92; Exports; Firm heterogeneity; Financial constraints; Leverage;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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