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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
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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. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
  2. Andrei A. Levchenko & Logan Lewis & Linda L. Tesar, 2009. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," Working Papers 592, Research Seminar in International Economics, University of Michigan.
  3. 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.
  4. Berman, Nicolas & Héricourt, Jérôme, 2010. "Financial factors and the margins of trade: Evidence from cross-country firm-level data," Journal of Development Economics, Elsevier, vol. 93(2), pages 206-217, November.
  5. 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.
  6. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2007. "Trade credit and bank credit: Evidence from recent financial crises," Journal of Financial Economics, Elsevier, vol. 83(2), pages 453-469, February.
  7. Amiti, Mary & Weinstein, David E., 2009. "Exports and Financial Shocks," CEPR Discussion Papers 7590, C.E.P.R. Discussion Papers.
  8. Buch, Claudia M. & Kesternich, Iris & Lipponer, Alexander & Schnitzer, Monika, 2014. "Financial constraints and foreign direct investment: firm-level evidence," Munich Reprints in Economics 19977, University of Munich, Department of Economics.
  9. Aghion, Philippe & Askenazy, Philippe & Berman, Nicolas & Cette, Gilbert & Eymard, Laurent, 2012. "Credit Constraints and the Cyclicality of R&D Investment: Evidence from France," Scholarly Articles 27759621, Harvard University Department of Economics.
  10. repec:pse:psecon:2008-26 is not listed on IDEAS
  11. Lionel Nesta & Flora Bellone & Patrick Musso & Stefano Schiavo, 2008. "Financial Constraints and Firm Export Behavior," Sciences Po publications 16, 2008, Sciences Po.
  12. 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.
  13. Stephen Redding, 2010. "Theories of Heterogeneous Firms and Trade," CEP Discussion Papers dp0994, Centre for Economic Performance, LSE.
  14. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  15. 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.
  16. Buono, Ines & Fadinger, Harald & Berger, Stefan, 2008. "The Micro Dynamics of Exporting: Evidence from French Firms," MPRA Paper 12940, University Library of Munich, Germany.
  17. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  18. 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.
  19. Jean-Charles Bricongne & Lionel Fontagné & Guillaume Gaulier & Daria Taglioni & Vincent Vicard, 2012. "Firms and the global crisis: French exports in the turmoil," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01299846, HAL.
  20. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  21. 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.
  22. 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.
  23. 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.
  24. Vlad Manole & Mariana Spatareanu, 2009. "Exporting, Capital Investment and Financial Constraints," LICOS Discussion Papers 25209, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  25. 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.
  26. Christian Arndt & Claudia Buch & Anselm Mattes, 2009. "Barriers to Internationalization: Firm-Level Evidence from Germany," IAW Discussion Papers 52, Institut für Angewandte Wirtschaftsforschung (IAW).
  27. Irac, D., 2008. "Access to new imported varieties and total factor productivity: Firm level evidence from France," Working papers 204, Banque de France.
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