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Summary Of: Trade Liberalization, Profitability, and Financial Leverage

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  • Baggs, Jennifer
  • Brander, James A.

Abstract

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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    File URL: https://www150.statcan.gc.ca/n1/en/catalogue/11F0019M2005257
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