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. Pedro Martins & Luca David Opromolla, 2011. "Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels," Working Papers w201123, Banco de Portugal, Economics and Research Department.
  2. Maria Bas & Antoine Berthou, 2011. "The Decision to Import Capital Goods in India: Firms' Financial Factors Matter," Working Papers 2011-06, CEPII research center.
  3. Mirabelle Muuls & Mauro Pisu, 2007. "Imports and exports at the level of the firm: evidence from Belgium," LSE Research Online Documents on Economics 19711, London School of Economics and Political Science, LSE Library.
  4. Andrei A. Levchenko & Logan Lewis & Linda L. Tesar, 2009. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," Working Papers 592, Research Seminar in International Economics, University of Michigan.
  5. Thomas Chaney, 2013. "Liquidity Constrained Exporters," NBER Working Papers 19170, National Bureau of Economic Research, Inc.
  6. Klingebiel, Daniela & Kroszner, Randall S & Laeven, Luc, 2006. "Banking Crises, Financial Dependence and Growth," CEPR Discussion Papers 5623, C.E.P.R. Discussion Papers.
  7. Alexander Vogel & Joachim Wagner, 2008. "Higher Productivity in Importing German Manufacturing Firms: Self-selection, Learning from Importing, or Both?," Working Paper Series in Economics 106, University of Lüneburg, Institute of Economics.
  8. 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.
  9. Thorsten Beck, 2004. "The determinants of financing obstacles," Policy Research Working Paper Series 3204, The World Bank.
  10. Martin Brown & Steven Ongena & Alexander Popov & Pinar Yeşin, 2011. "Who needs credit and who gets credit in Eastern Europe?," Economic Policy, CEPR;CES;MSH, vol. 26(65), pages 93-130, January.
  11. Carlo Altomonte & Gabor Békés, 2009. "Trade Complexity and Productivity," KITeS Working Papers 016, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2009.
  12. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  13. Armando Silva, 2011. "Financial Constraints and Exports: Evidence from Portuguese Manufacturing Firms," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 4(3), pages 7-19, December.
  14. Yuriy Gorodnichenko & Monika Schnitzer, 2013. "Financial Constraints And Innovation: Why Poor Countries Don'T Catch Up," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 1115-1152, October.
  15. Besedeš, Tibor & Kim, Byung-Cheol & Lugovskyy, Volodymyr, 2014. "Export growth and credit constraints," European Economic Review, Elsevier, vol. 70(C), pages 350-370.
  16. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  17. 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.
  18. 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.
  19. Kasahara, Hiroyuki & Lapham, Beverly, 2013. "Productivity and the decision to import and export: Theory and evidence," Journal of International Economics, Elsevier, vol. 89(2), pages 297-316.
  20. 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.
  21. Flora Bellone & Patrick Musso & Lionel Nesta & Michel Quere, 2008. "The U-Shaped Productivity Dynamics of French Exporters," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(4), pages 636-659, December.
  22. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  23. Armando Silva & Oscar Afonso & Ana Africano, 2013. "Economic performance and international trade engagement: the case of Portuguese manufacturing firms," International Economics and Economic Policy, Springer, vol. 10(4), pages 521-547, December.
  24. 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.
  25. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  26. 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.
  27. 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.
  28. 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.
  29. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2008. "Financial Constraints and Firm Export Behavior," Department of Economics Working Papers 0816, Department of Economics, University of Trento, Italia.
  30. 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.
  31. 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.
  32. JaeBin Ahn & Amit K. Khandelwal & Shang-Jin Wei, 2010. "The Role of Intermediaries in Facilitating Trade," NBER Working Papers 15706, National Bureau of Economic Research, Inc.
  33. Kugler, Maurice & Verhoogen, Eric A, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," CEPR Discussion Papers 7119, C.E.P.R. Discussion Papers.
  34. 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.
  35. 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.
  36. Mary Amiti & Jozef Konings, 2005. "Trade Liberalization, Intermediate Inputs, and Productivity; Evidence From Indonesia," IMF Working Papers 05/146, International Monetary Fund.
  37. Mary Amiti & Amit K. Khandelwal, 2009. "Import Competition and Quality Upgrading," NBER Working Papers 15503, National Bureau of Economic Research, Inc.
  38. 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.
  39. 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.
  40. 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.
  41. 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.
  42. Mary Amiti & David E. Weinstein, 2009. "Exports and Financial Shocks," NBER Working Papers 15556, National Bureau of Economic Research, Inc.
  43. repec:ner:tilbur:urn:nbn:nl:ui:12-4295079 is not listed on IDEAS
  44. Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2011. "Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China," NBER Working Papers 16940, National Bureau of Economic Research, Inc.
  45. Mona Haddad & Ann Harrison & Catherine Hausman, 2010. "Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis," NBER Working Papers 16253, National Bureau of Economic Research, Inc.
  46. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  47. 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.
  48. Kon, Y & Storey, D J, 2003. " A Theory of Discouraged Borrowers," Small Business Economics, Springer, vol. 21(1), pages 37-49, August.
  49. 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.
  50. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
  51. repec:ner:tilbur:urn:nbn:nl:ui:12-3125429 is not listed on IDEAS
  52. Hoekman, Bernard M. & Maskus, Keith E. & Saggi, Kamal, 2005. "Transfer of technology to developing countries: Unilateral and multilateral policy options," World Development, Elsevier, vol. 33(10), pages 1587-1602, October.
  53. Jen Baggs & James A Brander, 2006. "Trade liberalization, profitability, and financial leverage," Journal of International Business Studies, Palgrave Macmillan, vol. 37(2), pages 196-211, March.
  54. Fergal McCann, 2009. "Importing, Exporting and Productivity in Irish Manufacturing," Working Papers 200922, School Of Economics, University College Dublin.
  55. 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.
  56. 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.
  57. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  58. Manova, Kalina, 2008. "Credit constraints, equity market liberalizations and international trade," Journal of International Economics, Elsevier, vol. 76(1), pages 33-47, September.
  59. Greenaway, David & Kneller, Richard, 2008. "Exporting, productivity and agglomeration," European Economic Review, Elsevier, vol. 52(5), pages 919-939, July.
  60. Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance 0403001, EconWPA.
  61. Wagner, Joachim, 2002. "Unobserved firm heterogeneity and the size-exports nexus : evidence from German panel data," HWWA Discussion Papers 194, Hamburg Institute of International Economics (HWWA).
  62. 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.
  63. Blalock, Garrick & Veloso, Francisco M., 2007. "Imports, Productivity Growth, and Supply Chain Learning," World Development, Elsevier, vol. 35(7), pages 1134-1151, July.
  64. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04.
  65. 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.
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.