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Financial Shocks and Firm Exports: A natural experiment approach with a massive earthquake

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  • MIYAKAWA Daisuke
  • HOSONO Kaoru
  • UCHINO Taisuke
  • ONO Arito
  • UCHIDA Hirofumi
  • UESUGI Iichiro

Abstract

This paper investigates the effect of financial shocks on firms' exports. To circumvent endogeneity problems, we utilize the natural experiment provided by the Great Hanshin-Awaji Earthquake in 1995. Using a unique firm-level dataset, we single out the effect of exogenous financial shocks on firms' exports by focusing on exports of firms that were not directly damaged by the earthquake but that transacted with damaged banks as their main banks. Our main findings are twofold. First, as for the extensive margins of exports, the probabilities of starting exports or of expanding export destination areas were smaller for undamaged firms that transacted with a damaged main bank than for that transacted with an undamaged main bank. Second, as for the intensive margins of exports, undamaged firms that transacted with a damaged main bank had a lower export-to-sales ratio than that transacted with an undamaged main bank. These findings lend support to the existence of the financial constraint on firm exports.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 14010.

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Length: 43 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:eti:dpaper:14010

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  1. Hosono, Kaoru & Miyakawa, Daisuke & Uchino, Taisuke & Hazama, Makoto & Ono, Arito & Uchida, Hirofumi & Uesugi, Iichiro, 2012. "Natural Disasters, Damage to Banks, and Firm Investment," Working Paper Series 18, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
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  8. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 711-744.
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  16. Paravisini, Daniel & Rappoport, Veronica & Schnabl, Philipp & Wolfenzon, Daniel, 2010. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data," Working Papers 2010-022, Banco Central de Reserva del Perú.
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  18. Nicola Cetorelli & Linda S. Goldberg, 2012. "Follow the Money: Quantifying Domestic Effects of Foreign Bank Shocks in the Great Recession," NBER Working Papers 17873, National Bureau of Economic Research, Inc.
  19. Sudheer Chava & Amiyatosh Purnanandam, 2006. "The effect of a banking crisis on bank-dependent borrowers," Proceedings 1030, Federal Reserve Bank of Chicago.
  20. Shrieves, Ronald E. & Dahl, Drew, 2003. "Discretionary accounting and the behavior of Japanese banks under financial duress," Journal of Banking & Finance, Elsevier, vol. 27(7), pages 1219-1243, July.
  21. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
  22. Atif Mian & Asim Ijaz Khwaja, 2006. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," NBER Working Papers 12612, National Bureau of Economic Research, Inc.
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