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Financial leverage and export quality: evidence from France

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  • Flora Bellone

    (Observatoire français des conjonctures économiques)

  • Michel Bernini

    (School of International Studies)

  • Sarah Guillou

    (Observatoire français des conjonctures économiques)

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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  • Flora Bellone & Michel Bernini & Sarah Guillou, 2015. "Financial leverage and export quality: evidence from France," Sciences Po publications info:hdl:2441/14bcgn3ce19, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/14bcgn3ce19ns9gv417qkp04in
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    Cited by:

    1. Yu, Ziliang & Tong, Jiadong, 2020. "Financing benefit from exporting: An indirect identification approach," Journal of Multinational Financial Management, Elsevier, vol. 57.
    2. Spiros Bougheas & Hosung Lim & Simona Mateut & Paul Mizen & Cihan Yalcin, 2018. "Foreign currency borrowing, exports and firm performance: evidence from a currency crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 24(17), pages 1649-1671, November.
    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. 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.
    7. David K. Chalmers & Marco Della Porta & Luca Sensini, 2020. "Export Intensity and Leverage: An Empirical Analysis of Spanish SMEs," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 382-386.
    8. Joachim Wagner, 2016. "Credit Constraints and Exports: A Survey of Empirical Studies Using Firm Level Data," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 12, pages 401-421, World Scientific Publishing Co. Pte. Ltd..
    9. 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.
    10. David K. Chalmers & Marco Della Porta & Luca Sensini, 2020. "Export Intensity and Leverage: An Empirical Analysis of Spanish SMEs," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 382-386.
    11. Pinto, João M. & Silva, Cátia S., 2021. "Does export intensity affect corporate leverage? Evidence from Portuguese SMEs," Finance Research Letters, Elsevier, vol. 38(C).

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    More about this item

    Keywords

    Capital structure; Investment; Output quality; Exports;
    All these keywords.

    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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