Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France

Philippe Askenazy, Aida Caldera, Guillaume Gaulier and Delphine Irac

Working papers from Banque de France

Abstract: This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model in which, lower access to external finance, or reduced internal liquidity, hampers the firm ability to finance the recurrent costs to serve foreign markets and decreases firm survival in foreign markets. Additionally, financial constraints act as a barrier to firm export expansion by decreasing the firm ability to finance the entry costs into new export markets; thus, they push firm to avoid losing destinations. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows us to construct various firm-level measures of financial constraints to test these predictions. We obtain two main results. First, credit constraints have a negative effect on the number of newly served destinations. Second, higher probability of exit from the export market is also associated with credit constraints; that is consistent with constraints limiting the financing of recurrent export costs.

Keywords: Firm heterogeneity; financial constraints; trade. (search for similar items in EconPapers)
JEL-codes: D24 D92 F14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011
New Economics Papers: this item is included in nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Related works:
Journal Article: Financial constraints and foreign market entries or exits: firm-level evidence from France (2015)
Working Paper: Financial constraints and foreign market entries or exits: firm-level evidence from France (2015)
Working Paper: Financial constraints and foreign market entries or exits: firm-level evidence from France (2015)
Working Paper: Financial Constraints and Foreign Market Entries or Exits: Firm Level Evidence from France (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:328

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