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Summary Of: Trade Liberalization, Profitability, and Financial Leverage


  • Baggs, Jennifer
  • Brander, James A.


This article summarizes findings from the research paper entitled: Trade liberalization, profitability, and financial leverage. Changes in international trade policy may influence financial leverage, the relative importance of debt as opposed to equity in financing the firm, expressed by a debt-to-asset ratio. The primary objective of this paper is to investigate empirically whether trade liberalization has an impact on leverage. The second is to estimate the effect of trade liberalization on profitability. Changes in trade policy are a major part of the international business environment, and our theoretical formulation suggests that trade liberalization influences leverage largely through its effect on profits. Therefore, testing the link between liberalization and profits is a central test of our overall theoretical structure. The paper is divided into the following sections: four testable hypotheses regarding the possible effect of trade liberalization on profits and leverage; a description of the data set; empirical results and analysis; and concluding remarks.

Suggested Citation

  • Baggs, Jennifer & Brander, James A., 2005. "Summary Of: Trade Liberalization, Profitability, and Financial Leverage," Analytical Studies Branch Research Paper Series 2005257e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:2005257e

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    References listed on IDEAS

    1. Statistics Canada, 1998. "Recent Canadian Evidence on Job Quality by Firm Size," Analytical Studies Branch Research Paper Series 1998128e, Statistics Canada, Analytical Studies Branch.
    2. Even, William E. & Macpherson, David A., 1990. "Plant size and the decline of unionism," Economics Letters, Elsevier, vol. 32(4), pages 393-398, April.
    3. Denise J. Doiron & W. Craig Riddell, 1994. "The Impact of Unionization on Male-Female Earnings Differences in Canada," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 504-534.
    4. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1993. "The Role of Pensions in the Labor Market," NBER Working Papers 4295, National Bureau of Economic Research, Inc.
    5. David E. Bloom & Richard B. Freeman, 1992. "The Fall in Private Pension Coverage in the U.S," NBER Working Papers 3973, National Bureau of Economic Research, Inc.
    6. Statistics Canada, 1996. "Changes in Job Tenure and Job Stability in Canada," Analytical Studies Branch Research Paper Series 1996095e, Statistics Canada, Analytical Studies Branch.
    7. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January.
    8. Rene Morissette, 1993. "Canadian Jobs and Firm Size: Do Smaller Firms Pay Less?," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 159-174, February.
    9. Parsons, Donald O., 1991. "The decline in private pension coverage in the United States," Economics Letters, Elsevier, vol. 36(4), pages 419-423, August.
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