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Financial constraints and exports: evidence from Portuguese manufacturing firms

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  • Armando Silva

    () (Instituto Politécnico do Porto, Escola Superior de Estudos Industriais e de Gestão)

Abstract

This paper analyzes the links between financial constraints and firm export behavior, at the firm level, by using data on Portuguese manufacturing enterprises. Theoretical models of Chaney (2005) and Manova (2010) suggest that credit constraints are detrimental for exports but no model explains consistently why exports could improve firms´ financial health. Previous empirical literature has not yet reached a consensus on these subjects and there is a great heterogeneity in measuring financial constraints and how to assess the causality relationships; results are also quite heterogeneous. Developing a very recent trend, we approximate credit constraints by using a financial score built on eight variables; to assess the effects of exports on the financial status of firms we apply, for the first time to these types of studies, a propensity score matching with difference in differences. This procedure is used to deal with the endogeneity problems, stemming from the fact that new exporters have most likely initial better financial health. We find that firms enjoying better financial health are more likely to become exporters and that new exporters show improvements in their financial situation. These findings have important policy implications as they suggest that public intervention to support exports is clearly justified.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 402.

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Length: 27 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:por:fepwps:402

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Keywords: exports; matching; financial constraints; corporate finances;

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  1. Patrick Musso & Stefano Schiavo, 2008. "The impact of financial constraints on firm survival and growth," Journal of Evolutionary Economics, Springer, vol. 18(2), pages 135-149, April.
  2. Aaron Tornell & Frank Westermann, 2003. "The Credit Channel in Middle Income Countries," CESifo Working Paper Series 832, CESifo Group Munich.
  3. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2008. "Financial Constraints and Firm Export Behavior," Department of Economics Working Papers 0816, Department of Economics, University of Trento, Italia.
  4. Vlad Manole & Mariana Spatareanu, 2009. "Exporting, Capital Investment and Financial Constraints," Working Papers Rutgers University, Newark 2009-005, Department of Economics, Rutgers University, Newark.
  5. Jan De Loecker, 2004. "Do Exports Generate Higher Productivity? Evidence from Slovenia," LICOS Discussion Papers 15104, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  6. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
  7. Jan De Loecker, 2010. "A Note on Detecting Learning by Exporting," NBER Working Papers 16548, National Bureau of Economic Research, Inc.
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Cited by:
  1. Joachim Wagner, 2012. "Credit constraints and exports: Evidence for German manufacturing enterprises," Working Paper Series in Economics 251, University of Lüneburg, Institute of Economics.
  2. Filipe SIlva & Carlos Carreira, 2011. "Financial constraints and exports: An analysis of Portuguese firms during the European monetary integration," GEMF Working Papers 2011-13, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Horácio C. Faustino & Joana C. Lima & Pedro Verga Matos, 2012. "Exports, Productivity and Innovation: Evidence from Portugal using micro data," Working Papers 2012/13, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  4. Filipe Silva & Carlos Carreira, 2012. "Measuring Firms' Financial Constraints: A Rough Guide," Notas Económicas, Faculdade de Economia, Universidade de Coimbra, issue 36, pages 23-46, December.
  5. Nakhoda, Aadil, 2012. "The influence of financial leverage of firms on their international trading activities," MPRA Paper 35765, University Library of Munich, Germany.
  6. Filipe Silva & Carlos Carreira, 2011. "Financial constraints, exports and monetary integration - Financial constraints and exports: An analysis of Portuguese firms during the European monetary integration," GEE Papers 0039, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Jul 2011.
  7. Gautam, Vikash, 2011. "Evidence on the dynamics of investment-cash flow sensitivity," MPRA Paper 35431, University Library of Munich, Germany, revised Dec 2011.

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