Financial constraints on export market exit of domestic firms versus foreign multinational corporation subsidiaries in South Korea

Using a Korean manufacturing firm-level data set covering a range of years from 2006 to 2013, this study investigates how the financial condition of firms, such as liquidity, leverage, and cash flow ratio, affects exit from export markets. It also analyses whether the financial status of foreign multinational corporation (MNC) subsidiaries differs from that of domestic firms with respect to the hazard of export market exit, especially during a global financial crisis. The empirical results confirm that, for domestic firms, the hazard of export market exit is affected by the firms’ financial condition only during a financial crisis. In other words, the financial vulnerability of domestic firms increases during the crisis, resulting in the hazard of export market exit. However, financial situations for foreign MNC subsidiaries do not affect exits from export markets, indicating a ‘finance-factor comparative advantage’.