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Financial Reliability and Firms' Export Activity

Author

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  • Emanuele Forlani

    (Department of Economics and Management, University of Pavia)

Abstract

This paper assesses the importance of firms' financial resources that are necessary to overcome sunk entry costs associated with export. We propose a new methodology to identify \textit{a priori} constrained firms, exploiting a rich data-set on Italian firms' assets and liabilities. We provide evidence that the entry probability is affected by the level of cash stock for the constrained firms: an increase of 10\% in the cash stock of constrained firms raises by an additional 0.17\% the entry probability of rationed firms, compared to unconstrained ones. Additionally, we find evidence that the liquidity is mainly used for investments in the development of new products for foreign markets. We do not find evidence that entry in the export market improves the firm's financial health, while \textit{ex-ante} new entrants are relatively more leveraged.

Suggested Citation

  • Emanuele Forlani, 2014. "Financial Reliability and Firms' Export Activity," DEM Working Papers Series 093, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0093
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    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0093.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Vijay Prakash Ojha & Areej Aftab Siddiqui & Biswajit Nag & Kashika Arora, 2024. "Role of ECGC in Export Performance of Firms in the MSME Sector of India," Working Papers 2467, Indian Institute of Foreign Trade.
    3. Goksel, Turkmen, 2012. "Financial constraints and international trade patterns," Economic Modelling, Elsevier, vol. 29(6), pages 2222-2225.
    4. Agarwal, Natasha & Chan, Jackie M.L. & Lodefalk, Magnus & Tang, Aili & Tano, Sofia & Wang, Zheng, 2023. "Mitigating information frictions in trade: Evidence from export credit guarantees," Journal of International Economics, Elsevier, vol. 145(C).

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    More about this item

    Keywords

    Credit constraints; Financial reliability; export;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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