Do Financial Factors Affect Exporting Decisions?
37 Pages Posted: 6 Dec 2005
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: Suggested Citation