Volatility, financial constraints, and trade

García-Vega, María; Guariglia, Alessandra; Spaliara, Marina-Eliza

Abstract

We construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms' earnings volatility, their degree of financial constraints, their survival probabilities, and their export market participation decisions. Our model predicts that more volatile firms are more likely to face financial constraints and to go bankrupt, need to be more productive to stay in the market, and have more incentives to start exporting. A further implication is that through market diversification, exports tend to stabilize firms' total sales. These predictions are supported by our empirical tests, which are based on a panel of 23,674 UK firms

Citation

García-Vega, M., Guariglia, A., & Spaliara, M.-E. (2012). Volatility, financial constraints, and trade. International Review of Economics and Finance, 21(1), 57-76. https://doi.org/10.1016/j.iref.2011.05.003

• Journal Article Type: Article
• Online Publication Date: May 10, 2011
• Publication Date: Jan 1, 2012
• Deposit Date: Sep 6, 2024
• Print ISSN: 1059-0560
• Electronic ISSN: 1059-0560
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 21
• Issue: 1
• Pages: 57-76
• DOI: https://doi.org/10.1016/j.iref.2011.05.003
• Public URL: https://nottingham-repository.worktribe.com/output/39174626
• Publisher URL: https://www-sciencedirect-com.nottingham.idm.oclc.org/science/article/pii/S1059056011000505?via%3Dihub