Do Financial Factors Affect Exporting Decisions?

37 Pages Posted: 6 Dec 2005

See all articles by David Greenaway

David Greenaway

University of Nottingham - School of Economics

Alessandra Guariglia

Durham University - Durham Business School

Richard Kneller

University of Nottingham

Abstract

Financial constraints are often cited as an important obstacle to firms' investment. This paper explores, for the first time, whether this conclusion also applies to firms' export market participation decisions. Using a panel of 9352 UK manufacturing firms over the period 1993-2003, we find that financially constrained firms are less likely to export. Moreover, balance sheet variables are significant determinants of firms' decisions to enter foreign markets. This happens because a healthier balance sheet makes it easier for firms to meet the sunk export market entry costs. Our results are robust to the use of different financial variables and different methods of estimation.

Keywords: Financial constraints, Exports, Firm heterogeneity

JEL Classification: D24, F14, D92

Suggested Citation

Greenaway, David and Guariglia, Alessandra and Kneller, Richard, Do Financial Factors Affect Exporting Decisions?. Available at SSRN: https://ssrn.com/abstract=863906 or http://dx.doi.org/10.2139/ssrn.863906

David Greenaway (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5469 (Phone)
+44 115 951 4159 (Fax)

Alessandra Guariglia

Durham University - Durham Business School ( email )

Durham Business School
Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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