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Credit market institutions and firm imports of capital goods: Evidence from developing countries

Dario Fauceglia ()

Journal of Comparative Economics, 2015, vol. 43, issue 4, 902-918

Abstract: Using firm-level data across seven developing countries, this paper studies the interaction between a firm’s wealth and a country’s credit market institutions on machinery and equipment imports (=capital imports). The panel analysis suggests that credit constraints have a negative impact on the capital import decision. However, the results also indicate that institutions such as creditor rights, an efficient debt enforcement and accounting standards improve access to external finance and reduce credit constraints with regard to capital imports. Firm-level difference-in-difference estimations that exploit a reform of the Brazilian bankruptcy law confirm the importance of credit market institutions for upgrading the technology embodied in capital goods.

Keywords: International trade; Capital goods imports; Institutions; Financial development; Credit constraints (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 G20 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:jcecon:v:43:y:2015:i:4:p:902-918