Does easing access to foreign financing matter for firm performance?

Udichibarna Bose, Sushanta Mallick () and Serafeim Tsoukas

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: The literature shows that rigid capital control policies adversely influence international trade, leading to external financial reforms in terms of greater cross-border access to financing, which, in turn, can stimulate aggregate productivity. However, the literature overlooks the relationships among access to external financing, firm-level productivity, and exporting performance. We fill this research gap by using a rich dataset of 11,612 Indian firms over the period 1988–2014 and study how a unique financial policy intervention affects firm performance. We establish a significant effect of capital-account liberalization through an export-oriented policy initiative on firms' productivity and, consequently, on their exporting activity. Finally, we find that the benefits of the policy reform are more pronounced for financially vulnerable firms characterized by either high debt or low liquidity.

Keywords: Productivity; Exporting; Foreign financing; FX market liberalization (search for similar items in EconPapers)
JEL-codes: F1 F4 G1 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (46)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920300833

DOI: 10.1016/j.jcorpfin.2020.101639

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