Financial Reliability and Firms' Export Activity

Emanuele Forlani ()

No 93, DEM Working Papers Series from University of Pavia, Department of Economics and Management

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.

Keywords: Credit constraints; Financial reliability; export (search for similar items in EconPapers)
JEL-codes: F10 F12 F13 L25 M20 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2014-10
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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