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Financial leverage and export quality: Evidence from France

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  • Michel Bernini

    (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)

  • Sarah Guillou

    () (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)

  • Flora Bellone

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique)

Abstract

Does corporate financial structure matter for a firm’s ability to compete in international markets through output quality? This study answers this question by using firm-level export and balance sheet data covering a large sample of French manufacturing exporters over the period 1997–2007. The main result is that there is a negative causal relation between a firm’s leverage and export quality, where quality is inferred from the estimation of a discrete choice model of foreign consumers’ demand. This result is robust across different specifications and estimation techniques. In addition, by estimating investment models we find that the negative impact of leverage on quality is consistent with theories predicting that the agency cost of debt determines suboptimal investment.
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Suggested Citation

  • Michel Bernini & Sarah Guillou & Flora Bellone, 2015. "Financial leverage and export quality: Evidence from France," Post-Print hal-01238987, HAL.
  • Handle: RePEc:hal:journl:hal-01238987
    DOI: 10.1016/j.jbankfin.2015.06.014
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01238987
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    Cited by:

    1. Spiros Bougheas & Hosung Lim & Simona Mateut & Paul Mizen & Cihan Yalcin, 2016. "Foreign Currency Borrowing, Exports and Firm Performance: Evidence from a Currency Crisis," Working Papers wp16, South East Asian Central Banks (SEACEN) Research and Training Centre.
    2. Joachim Wagner, 2014. "Credit constraints and exports: a survey of empirical studies using firm-level data," Industrial and Corporate Change, Oxford University Press, vol. 23(6), pages 1477-1492.
    3. Bastos, Paulo & Silva, Joana, 2010. "The quality of a firm's exports: Where you export to matters," Journal of International Economics, Elsevier, vol. 82(2), pages 99-111, November.
    4. Anwar, Sajid & Sun, Sizhong, 2018. "Foreign direct investment and export quality upgrading in China's manufacturing sector," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 289-298.
    5. Eddy Bekkers & Joseph Francois & Miriam Manchin, 2020. "Sector and importer determinants of prices for traded intermediates," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(2), pages 720-742, May.
    6. Jiayun Xu & Qilin Mao, 2018. "On the relationship between intermediate input imports and export quality in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(3), pages 429-467, July.
    7. Ilona Sergant & Patrick Cayseele, 2019. "Financial Constraints: State Aid to the Rescue? Empirical Evidence from Belgian Firm-Level Data," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 33-67, March.

    More about this item

    Keywords

    Exports; Output quality; Investment; Capital structure;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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