Volatility, Financial Constraints, and trade

María García-Vega and Alessandra Guariglia

Discussion Papers from University of Nottingham, GEP

Abstract: We construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms’ earnings volatility, the degree of financial constraints that they face, their survival probabilities, and their export market participation decisions. Our model predicts that more volatile firms are more likely to face financial constraints and to go bankrupt, need to be more productive to stay in the market, and are more likely to enter export markets. A further implication is that through market diversification, exports tend to stabilize firms’ total sales. We test these predictions, using a panel of 9292 UK manufacturing firms over the period 1993-2003. The data provide strong support to our model.

Keywords: Firm-level volatility; Financial constraints; Firm survival; Exports (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Volatility, financial constraints, and trade (2012)
Working Paper: Volatility, Financial Constraints and Trade (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:07/33

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