Trade and firm financing

Paul Bergin, Ling Feng and Ching-Yi Lin

Journal of International Economics, 2021, vol. 131, issue C

Abstract: Financial frictions can pose a barrier to export entry by altering a firm's long-term capital structure. The focus on long-term firm financing is motivated by our empirical finding that exporting firms tend to be more leveraged than non-exporting firms in terms of long-term debt, as distinct from short-term working capital. We explain this fact by marrying a corporate finance model of capital structure, featuring an endogenous choice between equity and long-term debt, with a trade model featuring heterogeneous firms and export entry. The model predicts that exporting firms will prioritize reducing the cost of long-term capital over relaxing a short-term working capital constraint to scale up production.

Keywords: Firm dynamics; Firm financing; Financial frictions; Capital restructuring (search for similar items in EconPapers)
JEL-codes: E44 F41 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Trade and Firm Financing (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000386

DOI: 10.1016/j.jinteco.2021.103461

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