Access to finance and firm exporting: An inverted-U relationship

Using firm-level data from the World Bank Enterprise Surveys (2006–2022), this study employs Probit models to examine the relationship between firms’ access to finance and their export decisions. We find strong evidence of an inverted-U relationship: firms facing severe financial constraints are more likely to export with improved financial access. However, once these firms attain sufficient financing, further alleviation of financial constraints does not yield additional incentives for exporting. Further analysis suggests that firm growth and innovation are two plausible channels through which access to finance affects firms’ decisions to export. These findings question the conventional belief that access to finance invariably promotes export activities, highlighting the necessity for policymakers to tailor trade policies according to specific circumstances.