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Time is Money: Cash-Flow Risk and Export Market Behavior

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  • P. BEAUMONT

    (Insee)

Abstract

Do liquidity constraints hinder firms’ entry in new markets? Exploiting an exogenous variation in payment delays triggered by a 2009 French reform, we use a unique combination of administrative data sets to test whether changes in working capital financing affect the propensity to enter new export markets. The effect of the reform on payment delays is isolated using a threshold rule introduced by the law. The estimations strongly support the idea that access to working capital financing plays a key role in the expansion in international markets: a decrease in payment delays by ten days is found to raise cash holdings by 1.4 percentage points and to increase the probability to reach a new foreign market by 0.4 percentage points. By contrast, the evolution of the volume of exports or the probability of exiting an export market do not seem to be affected by the variation of payment delays.

Suggested Citation

  • P. Beaumont, 2017. "Time is Money: Cash-Flow Risk and Export Market Behavior," Documents de Travail de l'Insee - INSEE Working Papers g2017-10, Institut National de la Statistique et des Etudes Economiques.
  • Handle: RePEc:nse:doctra:g2017-10
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    File URL: https://www.insee.fr/fr/statistiques/fichier/3287540/G2017-10.pdf
    File Function: Document de travail de la DESE numéro G2017/10
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    More about this item

    Keywords

    liquidity constraints; trade credit; IV estimation; exports;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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