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Access to finance, exporting and a non-monotonic firm expansion


In this paper we analyse the role financial constraints play in firm expansion in both domestic and export markets. We use data on Slovenian manufacturing firms that were active between 2001 and 2012. In contrast to existing studies, we use generalized propensity score and continuous matching techniques to estimate the effects of differences in access to bank financing. We show that the response of sales to measure of access to external funds differs considerably between firms of different size. The largest effect of additional external funds is observed for small firms. Moreover, the relationship between debt and domestic/foreign sales is non-monotonic, displaying a pronounced inverse U-shape. Thus, an increase in debt financing may cause a decrease in exporting and domestic sales for some levels of indebtedness, while stimulating it for other levels.

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  1. Using a sample of Slovenian manufacturing firms, Damijan et al. (2010) confirm that liquidity constraints significantly hamper expansion of new exporters in foreign markets both in terms of the number of products exported and the number of destinations served.

  2. There is ample evidence suggesting that the sunk and variable costs of exporting have been decreasing substantially over the past few decades with the rapid evolution of information and communication technologies. While the effect of these technological improvements is very sector specific, these changes have enabled firms to tap into markets that would have been unreachable only a decade ago.

  3. The latter is made more difficult by the “funding gap” (see Hall and Lerner 2010 for innovation financing) that could be present in financing export ventures as opposed to domestic expansion. Effectively, due to the “lemons problem”, investment in exports may be underfinanced.

  4. This suggests that small firms are likely to finance their operations with trade credit.

  5. We also used alternative measure of firm size—number of employees as a robustness test. The key results were, however, qualitatively similar and are thus omitted from the text.

  6. In order to work with the largest possible sample size we consider contemporaneous impact of financing constraints on export intensity. However, we also test the robustness of this approach by lagging both sides of by one period. The results are qualitatively and quantitatively very similar to our baseline model.

  7. The continuous matching approach does not require to explicitly control for survival as we compare pairs of surviving firms. This makes it likely that our estimates represent the lower bound of the actual differences between treated and control firms. As a robustness check, we also include a selection equation, based on firm survival, in the estimation of the generalized propensity score and find the results are qualitatively almost identical to the ones presented below.

  8. We estimate the GPS function and generate the corresponding dose-response function by using “gpscore” and “doseresponse” commands in STATA.

  9. Some firms in the dataset exhibit higher debt to asset ratio, but have negative or no equity. These firms are likely in the process of bankruptcy (or Chapter 11). Our sample is reduced by roughly 7 % of observations.The average size of the excluded firms is 2.4 employees.

  10. Changing the crisis period to exclude 2008 and 2010 does not cause a qualitative change in the results.

  11. If the capital markets are not functioning perfectly, i.e. there are informational asymmetries with respect to credit availability or substantial costs of switching between banks, supply-side factors could impact the dose responses as well. Namely, as we do not have information on credit providers, we are unable to control for heterogeneity in the supply of credit faced by different firms. As different banks may differently interpret creditworthiness, similar firms may in fact face supply side constraints with different credit suppliers.


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The project is funded by the EU Sixth Framework Programme (

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Correspondence to Črt Kostevc.

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This paper was prepared for MICRO-DYN (, an international economic research project focusing on the competitiveness of firms, regions and industries in the knowledge-based economy. This publication reflects only the views of authors, the European Commission is not liable for any use that may be made of the information contained therein.



See Tables 4, 5 and Figs. 7, 8.

Table 4 Share of variance of (current) debt-to-asset ratio explained
Table 5 Generalised propensity score estimates
Fig. 7
figure 7

Dose-response functions for bank-debt-to-assets ratio as treatment and domestic and foreign sales-to-employment ratios as outcomes. a Pre-crisis period (2002–2008). b Crisis period (2009–2012). Source AJPES and own calculations. Note The results are obtained for a sample of small firms, which employ between 2 and 50 workers

Fig. 8
figure 8

Dose-response functions for bank-debt-to-assets ratio as treatment and growth rates of domestic and foreign sales as outcomes. a Pre-crisis period (2002–2008). b Crisis period (2009–2012). Source AJPES and own calculations. Note The results are obtained for a sample of small firms, which employ between 2 and 50 workers

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Damijan, J.P., Kostevc, Č. & Polanec, S. Access to finance, exporting and a non-monotonic firm expansion. Empirica 42, 131–155 (2015).

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  • Exports
  • Financial constraints
  • Continuous matching
  • Intensive margin

JEL Classification

  • D24
  • F12
  • F14