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Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France

  • Askenazy, Ph.
  • Caldera, A.
  • Gaulier, G.
  • Irac, D.

This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model in which, lower access to external finance, or reduced internal liquidity, hampers the firm ability to finance the recurrent costs to serve foreign markets and decreases firm survival in foreign markets. Additionally, financial constraints act as a barrier to firm export expansion by decreasing the firm ability to finance the entry costs into new export markets; thus, they push firm to avoid losing destinations. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows us to construct various firm-level measures of financial constraints to test these predictions. We obtain two main results. First, credit constraints have a negative effect on the number of newly served destinations. Second, higher probability of exit from the export market is also associated with credit constraints; that is consistent with constraints limiting the financing of recurrent export costs.

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Paper provided by Banque de France in its series Working papers with number 328.

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Length: 28 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:bfr:banfra:328
Contact details of provider: Postal:
Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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  1. Mary Amiti & David E. Weinstein, 2009. "Exports and Financial Shocks," NBER Working Papers 15556, National Bureau of Economic Research, Inc.
  2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  3. Vlad Manole & Mariana Spatareanu, 2009. "Exporting, Capital Investment and Financial Constraints," Working Papers Rutgers University, Newark 2009-005, Department of Economics, Rutgers University, Newark.
  4. Jean-Charles Bricongne & Lionel Fontagné & Guillaume Gaulier & Vincent Vicard & Daria Taglioni, 2012. "Firms and the global crisis: French exports in the turmoil," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00639897, HAL.
  5. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  6. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2005. "Trade credit and bank credit : evidence from recent financial crises," Policy Research Working Paper Series 3716, The World Bank.
  7. Christian Arndt & Claudia Buch & Anselm Mattes, 2009. "Barriers to Internationalization: Firm-Level Evidence from Germany," IAW Discussion Papers 52, Institut für Angewandte Wirtschaftsforschung (IAW).
  8. Logan Lewis & Linda Tesar & Andrei Levchenko, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," 2010 Meeting Papers 109, Society for Economic Dynamics.
  9. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  10. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2010. "Financial Constraints and Firm Export Behavior," Post-Print halshs-00720196, HAL.
  11. Stephen Redding, 2010. "Theories of heterogeneous firms and trade," LSE Research Online Documents on Economics 48908, London School of Economics and Political Science, LSE Library.
  12. Campa, Jose M. & Shaver, J. Myles, 2002. "Exporting and capital investment: On the strategic behavior of exporters," IESE Research Papers D/469, IESE Business School.
  13. Nicolas Berman & Jérôme Héricourt, 2008. "Financial factors and the margins of trade : evidence from cross-country firm-level data," Documents de travail du Centre d'Economie de la Sorbonne bla08050, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  14. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2001. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," NBER Working Papers 8629, National Bureau of Economic Research, Inc.
  15. Philippe Aghion & Philippe Askenazy & Nicolas Berman & Gilbert Cette & Laurent Eymard, 2012. "Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1001-1024, October.
  16. Claudia Buch & Iris Kesternich & Alexander Lipponer & Monika Schnitzer, 2014. "Financial constraints and foreign direct investment: firm-level evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 393-420, May.
  17. Buono, Ines & Fadinger, Harald & Berger, Stefan, 2008. "The Micro Dynamics of Exporting: Evidence from French Firms," MPRA Paper 12940, University Library of Munich, Germany.
  18. Marc Auboin & Martina Engemann, 2014. "Testing the trade credit and trade link: evidence from data on export credit insurance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 715-743, November.
  19. Christian Arndt & Claudia M. Buch & Anselm Mattes, 2012. "Disentangling barriers to internationalization," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 41-63, February.
  20. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  21. Irac, D., 2008. "Access to new imported varieties and total factor productivity: Firm level evidence from France," Working papers 204, Banque de France.
  22. Steven M. Fazzari & Bruce C. Petersen, 1993. "Working Capital and Fixed Investment: New Evidence on Financing Constraints," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 328-342, Autumn.
  23. repec:pse:psecon:2008-26 is not listed on IDEAS
  24. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  25. Minetti, Raoul & Zhu, Susan Chun, 2011. "Credit constraints and firm export: Microeconomic evidence from Italy," Journal of International Economics, Elsevier, vol. 83(2), pages 109-125, March.
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