Volatility, Financial Constraints, and trade
AbstractWe construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms’ earnings volatility, the degree of financial constraints that they face, their survival probabilities, and their export market participation decisions. Our model predicts that more volatile firms are more likely to face financial constraints and to go bankrupt, need to be more productive to stay in the market, and are more likely to enter export markets. A further implication is that through market diversification, exports tend to stabilize firms’ total sales. We test these predictions, using a panel of 9292 UK manufacturing firms over the period 1993-2003. The data provide strong support to our model.
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Bibliographic InfoPaper provided by University of Nottingham, GEP in its series Discussion Papers with number 07/33.
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Firm-level volatility; Financial constraints; Firm survival; Exports;
Other versions of this item:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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