IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Firms' Leverage and Export Quality: Evidence from France

  • Michele Bernini
  • Sarah Guillou
  • Flora Bellone

Is corporate financial structure a determinant of non-price competitiveness in export markets? 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 contribution 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 enhances 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 that debt financing hampers the incentive to undertake quality upgrading investments.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2013-29.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2013-29.

as
in new window

Length: 28 pages
Date of creation: Sep 2013
Date of revision:
Publication status: Published in Journal of Banking and Finance, 2015, vol. 59, pp. 280-296.
Handle: RePEc:gre:wpaper:2013-29
Contact details of provider: Postal:
250, rue Albert Einstein, 06560 Valbonne

Phone: +33-493-954-172
Fax: +33-493-653-798
Web page: http://www.gredeg.cnrs.fr

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2010. "Financial Constraints and Firm Export Behavior," Post-Print halshs-00720196, HAL.
  2. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 711-744.
  3. 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.
  4. Fan, Haichao & Lai, Edwin L.-C. & Li, Yao Amber, 2012. "Credit Constraints, Quality, and Export Prices: Theory and Evidence from China," MPRA Paper 40857, University Library of Munich, Germany.
  5. 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.
  6. Askenazy, Ph. & Caldera, A. & Gaulier, G. & Irac, D., 2011. "Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France," Working papers 328, Banque de France.
  7. Irving B. Kravis & Robert E. Lipsey, 1971. "Price Competitiveness in World Trade," NBER Books, National Bureau of Economic Research, Inc, number krav71-1, 07.
  8. Xavier Boutin & Giacinta Cestone & Chiara Fumagalli & Giovanni Pica & Nicolas Serrano-Velarde, 2009. "The Deep-Pocket Effect of Internal Capital Markets," Working Papers 2009.108, Fondazione Eni Enrico Mattei.
  9. Aivazian, Varouj A. & Ge, Ying & Qiu, Jiaping, 2005. "The impact of leverage on firm investment: Canadian evidence," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 277-291, March.
  10. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  11. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  12. Amit Khandelwal, 2009. "The Long and Short (of) Quality Ladders," NBER Working Papers 15178, National Bureau of Economic Research, Inc.
  13. Crozet, Matthieu & Head, Keith & Mayer, Thierry, 2009. "Quality Sorting And Trade: Firm-Level Evidence For French Wine," Working Papers 53883, American Association of Wine Economists.
  14. Fabrizio Coricelli & Nigel Driffield & Sarmistha Pal & Isabelle Roland, 2012. "When does leverage hurt productivity growth? A firm-level analysis," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00818426, HAL.
  15. David A. Matsa, 2011. "Running on Empty? Financial Leverage and Product Quality in the Supermarket Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 137-73, February.
  16. Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
  17. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
  18. Paulo Macas Nunes & Tiago Neves Sequeira & Zelia Serrasqueiro, 2007. "Firms' leverage and labour productivity: a quantile approach in Portuguese firms," Applied Economics, Taylor & Francis Journals, vol. 39(14), pages 1783-1788.
  19. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 379-436.
  20. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  21. Francesco Nucci & Alberto F. Pozzolo & Fabiano Schivardi, 2005. "Is Firm's Productivity Related to its Financial Structure? Evidence from Microeconomic Data," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 269-290, January-F.
  22. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
  23. Mick Silver, 2007. "Do Unit Value Export, Import, and Terms of Trade Indices Represent or Misrepresent Price Indices?," IMF Working Papers 07/121, International Monetary Fund.
  24. Paulo Bastos & Joana Silva, . "The Quality of a Firm’s Exports: Where you Export to Matters," Discussion Papers 08/18, University of Nottingham, GEP.
  25. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  26. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  27. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  28. Maksimovic, Vojislav & Titman, Sheridan, 1991. "Financial Policy and Reputation for Product Quality," Review of Financial Studies, Society for Financial Studies, vol. 4(1), pages 175-200.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:gre:wpaper:2013-29. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patrice Bougette)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.