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Firms leverage and export quality:evidence from France

  • Michele Bernini

    ()

    (University of Trento,School of intenational Studies Italie)

  • Sarah Guillou

    ()

    (Ofce sciences-po)

  • Flora Bellone

    (University of Nice Sophia Antipolis, France)

Is corporate financial structure a determinant of non-price competitiveness in export mar- kets? In this paper we provide a positive answer to this question by finding that among illiquid exporters leverage is negatively correlated with the quality of their exported goods.This result is obtained on a sample including over 120,000 export flows of 6,229 French firms exporting within six HS6 products categories. The main methodological contribu- tion of our study is the use of a flow-level measure of export quality obtained from the estimation of a structural model of demand Berry, 1994; this estimator enhance the validity of our approach by avoiding the drawbacks of proxying for quality using export prices, as it is common practice in the trade literature.We argue that the negative impact of leverage on quality is consistent with theoretical contributions in the financial literature predicting a negative impact of debt financing on firms’ incentive to undertake quality upgrading investments.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2013-13.

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Date of creation: Sep 2013
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Handle: RePEc:fce:doctra:1313
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  1. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2010. "Financial Constraints and Firm Export Behaviour," The World Economy, Wiley Blackwell, vol. 33(3), pages 347-373, 03.
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  11. Paulo Bastos & Joana Silva, . "The Quality of a Firm’s Exports: Where you Export to Matters," Discussion Papers 08/18, University of Nottingham, GEP.
  12. Kugler, M., Verhoogen, E.A., 2008. "Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia," Working Papers eg0058, Wilfrid Laurier University, Department of Economics, revised Feb 2008.
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