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

Philippe Askenazy, Aida Caldera, Guillaume Gaulier and Delphine Irac

No 1112, CEPREMAP Working Papers (Docweb) from CEPREMAP

Abstract: This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model of the multi-country firm, 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 and by the same token may increase firm survival in a given foreign market. 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. This seems to suggest that, no less than an issue of financing entry costs, credit constraints bear upon the recurrent costs of survival in an existing destination and strongly affect the firms’portfolio of destinations by this token.

Keywords: firm heterogeneity; financial constraints; trade (search for similar items in EconPapers)
JEL-codes: D24 D92 F14 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011-10
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 (37)

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http://www.cepremap.fr/depot/docweb/docweb1112.pdf (application/pdf)

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:cpm:docweb:1112

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