Abstract

http://ssrn.com/abstract=1832647
 


 



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


Philippe Askenazy


Institute for the Study of Labor (IZA); Paris School of Economics (PSE)

Aida Caldera


Banque de France

Guillaume Gaulier


Banque de France

Delphine Irac


Banque de France

April 1, 2011

Banque de France Working Paper No. 328

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.

Number of Pages in PDF File: 28

Keywords: Firm heterogeneity, financial constraints, trade

JEL Classification: D24, F14, D92

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Date posted: May 7, 2011  

Suggested Citation

Askenazy, Philippe and Caldera, Aida and Gaulier, Guillaume and Irac, Delphine, Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France (April 1, 2011). Banque de France Working Paper No. 328. Available at SSRN: http://ssrn.com/abstract=1832647 or http://dx.doi.org/10.2139/ssrn.1832647

Contact Information

Philippe Askenazy
Institute for the Study of Labor (IZA)
Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany
Paris School of Economics (PSE) ( email )
48 Boulevard Jourdan
Paris, 75014 75014
France
Aida Caldera
Banque de France ( email )
Paris
France
Guillaume Gaulier
Banque de France ( email )
Paris
France
Delphine Irac (Contact Author)
Banque de France ( email )
Paris
France
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