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Liquidity Constraints and Firm’s Export Activity

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  • Emanuele Forlani

    ()
    (Université catholique de Louvain – CORE)

Abstract

This paper will assess the importance of internal firm resources in overcoming sunk entry costs associated with export. When firms are not able to raise additional external funds for investments, they are credit-constrained, and in such a case, new exporters have to rely on their internal liquidity to pay sunk costs. Using a data set of small and medium size Italian enterprises (SMEs), we find that entry probability in the export market is affected by the level of cash stock for constrained firms. We propose a methodology used to identify a priori constrained firms, employing index analysis as used in business economics. The estimation of the Euler equation for investments confirms the fitness of our classification. In addition we find that exporters show higher liquidity if they raise the number of destinations. Finally, we do not find evidence that entry in the export market improves firm\'s financial health, while ex-ante new entrants are found to be relatively more leveraged.

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File URL: http://www.dagliano.unimi.it/media/WP2010_291.pdf
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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 291.

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Length: 44
Date of creation: 30 Apr 2010
Date of revision: 30 Apr 2010
Handle: RePEc:csl:devewp:291

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Keywords: Productivity; Credit constraints; Heterogenous firms; Trade;

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References

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  1. Vlad Manole & Mariana Spatareanu, 2009. "Exporting, Capital Investment and Financial Constraints," Working Papers Rutgers University, Newark, Department of Economics, Rutgers University, Newark 2009-005, Department of Economics, Rutgers University, Newark.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
  3. Poncet, Sandra & Steingress, Walter & VANDENBUSSCHE, Hylke, 2008. "Financial constraints in China: firm-level evidence," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2008079, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
  5. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  6. Konings, Jozef & Vandenbussche, Hylke, 2008. "Heterogeneous responses of firms to trade protection," Journal of International Economics, Elsevier, Elsevier, vol. 76(2), pages 371-383, December.
  7. Beck, T.H.L., 2003. "Financial dependence and international trade," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125509, Tilburg University.
  8. Kiminori Matsuyama, 2004. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1389, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Nicolas Berman & Jérôme Héricourt, 2008. "Financial Factors and the Margins of Trade: Evidence from Cross-Country Firm-Level Data," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00321632, HAL.
  10. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3381, C.E.P.R. Discussion Papers.
  11. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Love, Inessa, 2001. "Financial development and financing constraints - international evidence from the structural investment model," Policy Research Working Paper Series 2694, The World Bank.
  13. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  14. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, Elsevier, vol. 73(2), pages 377-395, November.
  15. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  16. Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
  17. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  18. Campa, Jose M. & Shaver, J. Myles, 2002. "Exporting and capital investment: On the strategic behavior of exporters," IESE Research Papers, IESE Business School D/469, IESE Business School.
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Cited by:
  1. Mawuli Segnon & Thomas Lux, 2013. "Multifractal Models in Finance: Their Origin, Propterties, and Applications," Kiel Working Papers 1860, Kiel Institute for the World Economy.
  2. Wagner, Joachim, 2013. "Credit constraints and exports: A survey of empirical studies using firm level data," Working Paper Series in Economics and Institutions of Innovation, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies 334, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  3. Filipe Silva & Carlos Carreira, 2011. "Financial Constraints and Exports: An Analysis of Portuguese Firms During the European Monetary Integration," Notas Económicas, Faculdade de Economia, Universidade de Coimbra, Faculdade de Economia, Universidade de Coimbra, issue 34, pages 35-56, December.
  4. Holger Görg & Marina-Eliza Spaliara, 2013. "Export Market Exit, Financial Pressure and the Crisis," CESifo Working Paper Series 4363, CESifo Group Munich.
  5. Carlo Altomonte & Tommaso Aquilante & Gianmarco Ottaviano, . "The triggers of competitiveness: The EFIGE cross-country report," Blueprints, Bruegel, number 738, December.
  6. Joachim Wagner, 2014. "Credit constraints and exports: evidence for German manufacturing enterprises," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 46(3), pages 294-302, January.
  7. Pauline Bourgeon & Jean-Charles Bricongne & Guillaume Gaulier, 2012. "Financing time to trade : Evidence from French firms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00677343, HAL.
  8. Silvio Contessi & Francesca de Nicola, 2012. "What do we know about the relationship between access to finance and international trade?," Working Papers, Federal Reserve Bank of St. Louis 2012-054, Federal Reserve Bank of St. Louis.
  9. Holger Gőrg & Marina-Eliza Spaliara, 2012. "Financial health, exports, and firm survival: Evidence from UK and French firms," Working Papers, Business School - Economics, University of Glasgow 2012_09, Business School - Economics, University of Glasgow.
  10. repec:hal:journl:halshs-00677343 is not listed on IDEAS

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