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Financial constraints and foreign market entries or exits: firm-level evidence from France

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  • Philippe Askenazy

    ()

  • Aida Caldera

    ()

  • Guillaume Gaulier

    ()

  • Delphine Irac

    ()

Abstract

In contrast to a large strand of the literature that focuses on multi-product firms, this paper examines multi-destinations firms and the effects of financial constraints on newly served and newly exited destinations. Intuitively, financial constraints have a negative impact on firm expansion in new destinations by limiting firm ability to finance entry costs. The effect on exit from existing destinations is ambiguous. Due to financial constraints, a firm may face difficulties financing the recurrent costs of maintaining her market presence. But if financial constraints also affect entry, the firm may have strong incentives to stay in a given destination since it may not be able to fund the fixed entry costs associated to the reallocation of her portfolio of destinations. We develop a simple theoretical model which includes these two effects. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows to construct various firm-level measures of financial constraints to test these predictions. The empirical results suggest that financial constraints hamper a firms’s ability to cover fixed entry costs as well as recurrent costs associated with maintaining the presence in a foreign market, thereby reducing the probability of entering into a new foreign markets and increasing the probability of exiting from an existing foreign market. Copyright Kiel Institute 2015

Suggested Citation

  • Philippe Askenazy & Aida Caldera & Guillaume Gaulier & Delphine Irac, 2015. "Financial constraints and foreign market entries or exits: firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 231-253, May.
  • Handle: RePEc:spr:weltar:v:151:y:2015:i:2:p:231-253
    DOI: 10.1007/s10290-014-0206-5
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    Citations

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    Cited by:

    1. Joachim Wagner, 2014. "Credit constraints and exports: evidence for German manufacturing enterprises," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 294-302, January.
    2. Gabriel J. Felbermayr & Erdal Yalcin, 2013. "Export Credit Guarantees and Export Performance: An Empirical Analysis for Germany," The World Economy, Wiley Blackwell, vol. 36(8), pages 967-999, August.
    3. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2011. "Exporting under financial constraints: margins, switching dynamics and prices," LEM Papers Series 2011/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Sarah Guillou & Michel Bernini & Flora Bellone, 2013. "Firms' leverage and export quality evidence from France," Sciences Po publications 2013-13, Sciences Po.
    5. Görg, Holger & Spaliara, Marina-Eliza, 2013. "Export market exit, financial pressure and the crisis," CEPR Discussion Papers 9599, C.E.P.R. Discussion Papers.
    6. Muûls, Mirabelle, 2015. "Exporters, importers and credit constraints," Journal of International Economics, Elsevier, vol. 95(2), pages 333-343.
    7. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p4sr364g4 is not listed on IDEAS
    8. Fábio Batista & José Eduardo Matos & Miguel Costa Matos, 2017. "Assessing the Competitiveness of the Portuguese Footwear Sector," GEE Papers 0066, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
    9. Wagner, Joachim, 2015. "Credit constraints and the extensive margins of exports: First evidence for German manufacturing," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 9, pages 1-17.
    10. repec:eee:ecosys:v:41:y:2017:i:1:p:41-51 is not listed on IDEAS
    11. Spiros Bougheas & Hosung Lim & Simona Mateut & Paul Mizen & Cihan Yalcin, "undated". "Foreign Currency Borrowing, Exports and Firm Performance: Evidence from a Currency Crisis," Working Papers wp16, South East Asian Central Banks (SEACEN) Research and Training Centre.
    12. Joachim Wagner, 2014. "Credit constraints and exports: a survey of empirical studies using firm-level data," Industrial and Corporate Change, Oxford University Press, vol. 23(6), pages 1477-1492.
    13. Huang, Xiaobing, 2017. "Exchange rate movements and export market dynamics: Evidence from China," Economics Discussion Papers 2017-13, Kiel Institute for the World Economy (IfW).
    14. Holger Görg & Marina-Eliza Spaliara, 2014. "Exporters in the Financial Crisis," National Institute Economic Review, National Institute of Economic and Social Research, vol. 228(1), pages 49-57, May.
    15. Görg, Holger & Spaliara, Marina-Eliza, 2017. "Export Market Exit and Financial Health in Crises Periods," KCG Working Papers 4, Kiel Centre for Globalization (KCG).
    16. Pauline Bourgeon & Jean-Charles Bricongne, 2016. "Financing Time to Trade," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01373461, HAL.
    17. A. Arrighetti & R. Brancati & A. Lasagni & A. Maresca, 2015. "Firms’ heterogeneity and performance in manufacturing during the great recession," Economics Department Working Papers 2015-EP03, Department of Economics, Parma University (Italy).
    18. repec:eee:jbfina:v:87:y:2018:i:c:p:150-163 is not listed on IDEAS

    More about this item

    Keywords

    Firm heterogeneity; Financial constraints; Trade; F1; G1;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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