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Firms' Leverage and Export Quality: Evidence from France

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  • Michele Bernini
  • Sarah Guillou
  • Flora Bellone

Abstract

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.

Suggested Citation

  • Michele Bernini & Sarah Guillou & Flora Bellone, 2013. "Firms' Leverage and Export Quality: Evidence from France," GREDEG Working Papers 2013-29, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2013-29
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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2013-29.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Eckel, Carsten & Unger, Florian, 2015. "Credit constraints, endogenous innovations, and price setting in international trade," Discussion Papers in Economics 24858, University of Munich, Department of Economics.
    2. Miravitlles, Paloma & Mora, Toni & Achcaoucaou, Fariza, 2016. "The role of corporate financial structure in the export propensity of manufacturing firms," Economics Discussion Papers 2016-16, Kiel Institute for the World Economy (IfW).
    3. Joachim Wagner, 2016. "A survey of empirical studies using transaction level data on exports and imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 215-225, February.
    4. Ciani, Andrea & Bartoli, Francesca, 2015. "Export quality upgrading under credit constraints," DICE Discussion Papers 191, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Haeng-Sun Kim, 2016. "Firms’ Leverage and Export Market Participation: Evidence from South Korea," Working Papers halshs-01643899, HAL.
    6. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    7. Haeng-Sun KIM, 2016. "Firms' leverage and export market participation: Evidence from South Korea," International Economics, CEPII research center, issue 148, pages 41-58.
    8. Rosario Crinò & Laura Ogliari, 2014. "Financial Frictions, Product Quality, and International Trade," Working Papers wp2014_1403, CEMFI.
    9. SAITO Hisamitsu & MATSUURA Toshiyuki, 2016. "Agglomeration Economies, Productivity, and Quality Upgrading," Discussion papers 16085, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Export; output quality; leverage;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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