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Firms leverage and export quality:evidence from France

Author

Listed:
  • Michele Bernini

    (University of Trento,School of intenational Studies Italie)

  • Sarah Guillou

    (Ofce sciences-po)

  • Flora Bellone

    (University of Nice Sophia Antipolis, France)

Abstract

Is corporate financial structure a determinant of non-price competitiveness in export mar- kets? In this paper we provide a positive answer to this question by finding that among illiquid exporters leverage is negatively correlated with the quality of their exported goods.This result is obtained on a sample including over 120,000 export flows of 6,229 French firms exporting within six HS6 products categories. The main methodological contribu- tion of our study is the use of a flow-level measure of export quality obtained from the estimation of a structural model of demand Berry, 1994; this estimator enhance the validity of our approach by avoiding the drawbacks of proxying for quality using export prices, as it is common practice in the trade literature.We argue that the negative impact of leverage on quality is consistent with theoretical contributions in the financial literature predicting a negative impact of debt financing on firms’ incentive to undertake quality upgrading investments.

Suggested Citation

  • Michele Bernini & Sarah Guillou & Flora Bellone, 2013. "Firms leverage and export quality:evidence from France," Documents de Travail de l'OFCE 2013-13, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1313
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. Carsten Eckel & Florian Unger, 2023. "Credit Constraints, Endogenous Innovations, And Price Setting In International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1715-1747, November.
    3. Miravitlles, Paloma & Mora, Toni & Achcaoucaou, Fariza, 2016. "The role of corporate financial structure in the export propensity of manufacturing firms," Economics Discussion Papers 2016-16, Kiel Institute for the World Economy (IfW Kiel).
    4. Joachim Wagner, 2016. "A survey of empirical studies using transaction level data on exports and imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 215-225, February.
    5. Ciani, Andrea & Bartoli, Francesca, 2015. "Export quality upgrading under credit constraints," DICE Discussion Papers 191, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Haeng-Sun Kim, 2016. "Firms’ Leverage and Export Market Participation: Evidence from South Korea," Working Papers halshs-01643899, HAL.
    7. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    8. Andrea Ciani & Francesca Bartoli, 2020. "Export quality differentiation under credit constraints," The World Economy, Wiley Blackwell, vol. 43(5), pages 1398-1433, May.
    9. Saito, Hisamitsu, 2021. "Foreign direct investment and quality upgrading in Indonesian manufacturing," MPRA Paper 106770, University Library of Munich, Germany.
    10. Haeng-Sun KIM, 2016. "Firms' leverage and export market participation: Evidence from South Korea," International Economics, CEPII research center, issue 148, pages 41-58.
    11. Nathan Mugumisi, 2018. "Zimbabwean Manufacturing Firms' Propensity and Intensity to Export in the Post Zimbabwean Dollar Era," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 42-48.
    12. SAITO Hisamitsu & MATSUURA Toshiyuki, 2016. "Agglomeration Economies, Productivity, and Quality Upgrading," Discussion papers 16085, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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