Advertisement

Empirica

, Volume 42, Issue 1, pp 131–155 | Cite as

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

  • Jože P. Damijan
  • Črt KostevcEmail author
  • Sašo Polanec
Original Paper

Abstract

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.

Keywords

Exports Financial constraints Continuous matching Intensive margin 

JEL Classification

D24 F12 F14 

Notes

Acknowledgments

The project is funded by the EU Sixth Framework Programme (http://www.cordis.lu/).

References

  1. Amiti M, Weinstein D (2013) How much do bank shocks affect investment? Evidence from matched bank-firm loan data, Federal Reserve Bank of New York Staff Reports No 604Google Scholar
  2. Angelini P, Generale A (2008) On the evolution of firm size distributions. Am Econ Rev 98(1):426–438CrossRefGoogle Scholar
  3. Bellone F, Musso P, Nesta L, Schiavo S (2010) Financial constraints and firm export behaviour. World Econ 33(3):347–373Google Scholar
  4. Bernal-Verdugo LE (2013) Bank financial distress and firm performance. University of Chicago, mimeoGoogle Scholar
  5. Bernard AB, Jensen JB, Redding SJ, Schott PK (2007) Firms in international trade. J Econ Persp 21(3):105–130CrossRefGoogle Scholar
  6. Bernard AB, Jensen JB, Redding SJ, Schott PK (2009) The margins of US trade. Am Econ Rev 99(2):487–493CrossRefGoogle Scholar
  7. Bond S (1994) Financial constraints and company investment. Fiscal Stud 15(2):1–18CrossRefGoogle Scholar
  8. Bond E, Tybout JR, Utar H (2008) Credit rationing, risk aversion and industrial evolution in developing countries, NBER working paper no. 14116Google Scholar
  9. Bonnet J, Cieply S, Dejardin M (2005) Financial constraints on new firms: looking for regional disparities. Discussion papers on entrepreneurship, growth and public policy no. 3705Google Scholar
  10. Cabral LMB, Mata J (2003) On the evolution of the firm size distribution: facts and theory. Am Econ Rev 93(4):1075–1090CrossRefGoogle Scholar
  11. Campello M, Graham JR, Harvey CR (2010) The real effects of financial constraints: evidence from a financial crisis. J Financ Econ 97(3):470–487CrossRefGoogle Scholar
  12. Chaney T (2005) Liquidity constrained exporters. University of Chicago, mimeoGoogle Scholar
  13. Cooley TF, Quadrini V (2001) Financial markets and firm dynamics. Am Econ Rev 91(5):1286–1310CrossRefGoogle Scholar
  14. Damijan JP, Kostevc Č, Polanec S (2010) Export strategies of new exporters. Unversity of Ljubljana, mimeoGoogle Scholar
  15. Desai M, Foley CF, Hines J (2006) Capital controls, liberalizations, and foreign direct investment. Rev Soc Stud 19(4):1433–1464Google Scholar
  16. Dixit AK, Pindyck RS (1994) Investment under uncertainty. Princeton University Press, PrincetonGoogle Scholar
  17. Eaton J, Eslava M, Kugler M, Tybout J (2007) Export dynamics in Colombia: firm-level evidence, NBER working paper no. 13531Google Scholar
  18. Evans DS (1987) The relationship between firm growth, size and age: estimates for 100 manufacturing industries. J Ind Organ 35(4):657–674Google Scholar
  19. Evans DS, Jovanovic B (1989) An estimated model of entrepreneurial choice under liquidity constraints. J Polit Econ 97:808–827CrossRefGoogle Scholar
  20. Fazzari S, Hubbard RG, Petersen B (1988) Financing constraints and corporate investment. Brook Papers Econ Act 1:141–195CrossRefGoogle Scholar
  21. Forbes KJ (2007) One cost of the chilean capital controls: increased financial constraints for smaller traded firms. J Int Econ 71(2):294–323CrossRefGoogle Scholar
  22. Greenaway D, Guariglia A, Kneller R (2007) Financial factors and exporting decisions. J Int Econ 73(2):377–395CrossRefGoogle Scholar
  23. Hall BH, Lerner J (2010) The financing of R&D and innovation. In: Hall BH, Rosenberg N (eds) Handbook of the economics of innovation. Elsevier-North Holland (forthcoming)Google Scholar
  24. Hirano K, Imbens GW (2004) The propensity score with continuous treatments. In: Gelman A, Meng X-L (eds) Applied Bayesian modeling and causal inference from incomplete-data perspectives. Wiley, New YorkGoogle Scholar
  25. Hubbard GR (1998) Capital-market imperfections and investment. J Econ Lit 36(1):193–225Google Scholar
  26. Imbens GW (2000) The role of the propensity score in estimating dose-response functions. Biometrika 87(3):706–710CrossRefGoogle Scholar
  27. Knight HF (1921) Risk, uncertainty and profit. Houghton Mifflin, BostonGoogle Scholar
  28. Opler T, Titman S (1994) Financial distress and corporate performance. J Finance 49(3):1015–1040CrossRefGoogle Scholar
  29. Rosenbaum P, Rubin D (1983) The central role of the propensity score in observational studies for causal effects. Biometrika 70(1):41–55CrossRefGoogle Scholar
  30. Rosenbaum P, Rubin D (1984) Reducing bias in observational studies using subclassification on the propensity score. J Am Statl Assoc 79:524–526Google Scholar
  31. Secchi A, Tamagni F, Tomasi C (2012) Exporting under financial constraints: margins, switching dynamics and prices, development working papers 338, centro studi luca d\'Agliano. University of Milano, revised 16 Jul 2012Google Scholar
  32. Stiglitz J, Weiss A (1981) Credit Rationing in Markets with Imperfect Information. American Economic Review 71(3):393–410Google Scholar
  33. Zia BH (2008) Export incentives, financial constraints, and the (mis)allocation of credit: micro-level evidence from subsidized export loans. J Financ Econ 87(2):498–527CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Jože P. Damijan
    • 1
    • 2
  • Črt Kostevc
    • 3
    Email author
  • Sašo Polanec
    • 1
  1. 1.Institute for Economic ResearchUniversity of LjubljanaLjubljanaSlovenia
  2. 2.LICOSKU LeuvenLeuvenBelgium
  3. 3.Institute for Economic ResearchUniversity of LjubljanaLjubljanaSlovenia

Personalised recommendations