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Does Easing Access to Foreign Financing Matter for Firm Performance?

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  • Udichibarna Bose
  • Sushanta Mallick
  • Serafeim Tsoukas

Abstract

The literature shows that rigid capital control policies adversely influence international trade, leading to external financial reforms in terms of greater cross-border access to financing, which can stimulate aggregate productivity. However, the literature overlooks the relationships among access to external financing, firm-level productivity, and exporting performance. We fill this gap by using a rich dataset of 11,612 Indian firms over the period 1988–2014 and study how a unique financial policy intervention affects firm performance. We establish a significant effect of capital-account liberalization through an export-oriented policy initiative on firms’ productivity and, consequently, on their exporting activity. Finally, we find that the benefits of the policy reform are more pronounced for financially vulnerable firms characterized by either high debt or low liquidity.

Suggested Citation

  • Udichibarna Bose & Sushanta Mallick & Serafeim Tsoukas, 2020. "Does Easing Access to Foreign Financing Matter for Firm Performance?," Working Papers 2020_12, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2020_12
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    3. Li, Chang & Yang, Lianxing, 2020. "Import to invest: Impact of cultural goods on cross-border mergers and acquisitions," Economic Modelling, Elsevier, vol. 93(C), pages 354-364.

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    More about this item

    Keywords

    Productivity; Exporting; Foreign Financing; FX market liberalization;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F1 - International Economics - - Trade
    • G1 - Financial Economics - - General Financial Markets

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