IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The influence of financial leverage of firms on their international trading activities

  • Nakhoda, Aadil

Using the BEEPS dataset from Enterprise Surveys, I study the effect of financial leverage (percentage of assets funded by bank loans) of firms on their decision to participate in various trading activities, such as exporting, importing and two way trading (firms that export and import). I determine that the intensity of financial leverage does not inhibit firms which export only from becoming two way traders, but it does inhibit firms which import only or operate only within the national market to become two way traders. The effect is determined to be stronger for firms that operate only within the national market than firms that import only. Since unobserved factors may influence both trading activities and financial leverage, I instrument for financial leverage using a variable that combines overdue payments to suppliers and the relationship of firms with their lenders. I contribute to the literature as I augment a model that determines the effect of financial leverage on various trading activities by implementing differences between industries due to their level of external dependence and asset tangibility. Hence, the effect of financial leverage is determined to vary between different trading activities within industries that exhibit different levels of external dependence and asset tangibility.

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://mpra.ub.uni-muenchen.de/35765/1/MPRA_paper_35765.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35765.

as
in new window

Length:
Date of creation: May 2012
Date of revision:
Handle: RePEc:pra:mprapa:35765
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

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. 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.
  2. Temouri, Yama & Vogel, Alexander & Wagner, Joachim, 2013. "Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 146-158.
  3. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2010. "Financial Constraints and Firm Export Behaviour," The World Economy, Wiley Blackwell, vol. 33(3), pages 347-373, 03.
  4. Andrei A. Levchenko & Logan T. Lewis & Linda L. Tesar, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," NBER Working Papers 16006, National Bureau of Economic Research, Inc.
  5. Brown, Martin & Ongena, Steven & Popov, Alexander & Yesin, Pinar, 2012. "Who needs credit and who gets credit in Eastern Europe?," Working Paper Series 1421, European Central Bank.
  6. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Thorsten Beck, 2004. "The determinants of financing obstacles," Policy Research Working Paper Series 3204, The World Bank.
  8. Paula Bustos, 2009. "Trade liberalization, exports and technology upgrading: Evidence on the impact of MERCOSUR on Argentinean firms," Economics Working Papers 1173, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
  10. Amiti, Mary & Weinstein, David E., 2009. "Exports and Financial Shocks," CEPR Discussion Papers 7590, C.E.P.R. Discussion Papers.
  11. Kyle Hyndman & Giovanni Serio, 2007. "Competition and Inter-Firm Credit: Theory and Evidence from Firm-level Data in Indonesia," Departmental Working Papers 0702, Southern Methodist University, Department of Economics.
  12. Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance 0403001, EconWPA.
  13. Haddad, Mona & Harrison, Ann & Hausman, Catherine, 2011. "Decomposing the great trade collapse : products, prices, and quantities in the 2008-2009 crisis," Policy Research Working Paper Series 5749, The World Bank.
  14. Gabor Békés & Carlo Altomonte, 2009. "Trade Complexity and Productivity," Working Papers 2009.62, Fondazione Eni Enrico Mattei.
  15. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  16. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  17. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  18. Maurice Kugler & Eric A. Verhoogen, 2007. "Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia," Discussion Papers 0708-12, Columbia University, Department of Economics.
  19. Armando Silva, 2011. "Financial constraints and exports: evidence from Portuguese manufacturing firms," FEP Working Papers 402, Universidade do Porto, Faculdade de Economia do Porto.
  20. Thomas Chaney, 2007. "Liquidity Constrained Exporters," 2007 Meeting Papers 979, Society for Economic Dynamics.
  21. Gorodnichenko, Yuriy & Schnitzer, Monika, 2010. "Financial constraints and innovation: Why poor countries don't catchup," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 341, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  22. Joel Stiebale, 2008. "Do Financial Constraints Matter for Foreign Market Entry? – A Firm-Level Examination," Ruhr Economic Papers 0051, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  23. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  24. Besedeš, Tibor & Kim, Byung-Cheol & Lugovskyy, Volodymyr, 2014. "Export growth and credit constraints," European Economic Review, Elsevier, vol. 70(C), pages 350-370.
  25. Armando Silva & Óscar Afonso & Ana Paula Africano, 2010. "Economic performance and international trade engagement: the case of Portuguese manufacturing firms," FEP Working Papers 369, Universidade do Porto, Faculdade de Economia do Porto.
  26. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
  27. Mirabelle Muûls & Mauro Pisu, 2007. "Imports and Exports at the Level of the Firm: Evidence from Belgium," CEP Discussion Papers dp0801, Centre for Economic Performance, LSE.
  28. Hoekman, Bernard M. & Maskus, Keith E. & Saggi, Kamal, 2004. "Transfer of technology to developing countries : unilateral and multilateral policy options," Policy Research Working Paper Series 3332, The World Bank.
  29. Martins, Pedro S. & Opromolla, Luca David, 2011. "Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels," IZA Discussion Papers 6013, Institute for the Study of Labor (IZA).
  30. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  31. Hiroyuki Kasahara & Beverly Lapham, 2008. "Productivity and the Decision to Import and Export: Theory and Evidence," CESifo Working Paper Series 2240, CESifo Group Munich.
  32. Maria Bas & Antoine Berthou, 2012. "The Decision to Import Capital Goods in India: Firms' Financial Factors Matter," World Bank Economic Review, World Bank Group, vol. 26(3), pages 486-513.
  33. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  34. Joachim Wagner, 2003. "Unobserved firm heterogeneity and the size-exports nexus: Evidence from German panel data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(1), pages 161-172, March.
  35. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2010. "Globalization and Innovation in Emerging Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 194-226, April.
  36. Mary Amiti & Amit K. Khandelwal, 2009. "Import Competition and Quality Upgrading," NBER Working Papers 15503, National Bureau of Economic Research, Inc.
  37. Klingebiel, Daniela & Kroszner, Randall S & Laeven, Luc, 2006. "Banking Crises, Financial Dependence and Growth," CEPR Discussion Papers 5623, C.E.P.R. Discussion Papers.
  38. Alexander Vogel & Joachim Wagner, 2010. "Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 641-665, January.
  39. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
  40. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04.
  41. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
  42. Peter MacKay & Gordon M. Phillips, 2005. "How Does Industry Affect Firm Financial Structure?," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1433-1466.
  43. repec:ner:tilbur:urn:nbn:nl:ui:12-3125429 is not listed on IDEAS
  44. Maurice Kugler & Eric Verhoogen, 2009. "Plants and Imported Inputs: New Facts and an Interpretation," American Economic Review, American Economic Association, vol. 99(2), pages 501-07, May.
  45. Lionel Nesta & Flora Bellone & Patrick Musso & Michel Quéré, 2007. "The U-Shaped Productivity Dynamics of French Exporters," Sciences Po publications 2007-01, Sciences Po.
  46. Baggs, Jennifer & Brander, James A., 2005. "Trade Liberalization, Profitability, and Financial Leverage," Analytical Studies Branch Research Paper Series 2005256e, Statistics Canada, Analytical Studies Branch.
  47. Manova, Kalina, 2008. "Credit constraints, equity market liberalizations and international trade," Journal of International Economics, Elsevier, vol. 76(1), pages 33-47, September.
  48. Rajendra R. Vaidya, 2011. "The Determinants of trade credit: Evidence from Indian manufacturing firms," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-012, Indira Gandhi Institute of Development Research, Mumbai, India.
  49. Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2014. "Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 729-744, October.
  50. Kon, Y & Storey, D J, 2003. " A Theory of Discouraged Borrowers," Small Business Economics, Springer, vol. 21(1), pages 37-49, August.
  51. Ralph de Haas & Marga Peeters, 2004. "The dynamic adjustment towards target capital structures of firms in transition economies," Working Papers 87, European Bank for Reconstruction and Development, Office of the Chief Economist.
  52. Blalock, Garrick & Veloso, Francisco M., 2007. "Imports, Productivity Growth, and Supply Chain Learning," World Development, Elsevier, vol. 35(7), pages 1134-1151, July.
  53. Atif Mian & Asim Ijaz Khwaja, 2006. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," NBER Working Papers 12612, National Bureau of Economic Research, Inc.
  54. Riccardo De Bonis & Giovanni Ferri & Zeno Rotondi, 2010. "Do bank-firm relationships influence firm internationalization?," Mo.Fi.R. Working Papers 37, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  55. Jyrki Niskanen & Mervi Niskanen, 2006. "The Determinants of Corporate Trade Credit Policies in a Bank-dominated Financial Environment: the Case of Finnish Small Firms," European Financial Management, European Financial Management Association, vol. 12(1), pages 81-102.
  56. Hur, Jung & Raj, Manoj & Riyanto, Yohanes E., 2006. "Finance and trade: A cross-country empirical analysis on the impact of financial development and asset tangibility on international trade," World Development, Elsevier, vol. 34(10), pages 1728-1741, October.
  57. Davide Castellani & Francesco Serti & Chiara Tomasi, 2008. "Firms in International Trade: Importers and Exporters Heterogeneity in the Italian Manufacturing Industry," LEM Papers Series 2008/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  58. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
  59. Fergal McCann, 2009. "Importing, Exporting and Productivity in Irish Manufacturing," Working Papers 200922, School Of Economics, University College Dublin.
  60. Jože P. Damijan & Črt Kostevc, 2011. "Firms' Pattern of Trade and Access to Finance," LICOS Discussion Papers 27811, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  61. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  62. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  63. Kalina Manova & Shang-Jin Wei & Zhiwei Zhang, 2011. "Firm Exports and Multinational Activity Under Credit Constraints," NBER Working Papers 16905, National Bureau of Economic Research, Inc.
  64. repec:ner:tilbur:urn:nbn:nl:ui:12-4295079 is not listed on IDEAS
  65. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
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:pra:mprapa:35765. 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: (Ekkehart Schlicht)

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.