Export Survival and Foreign Financing

Exporting is a finance intensive activity. However, exporters may be confronted with domestic credit constrains and/or high costs of funding in domestic financial markets. This paper investigates whether foreign financing... [ view full abstract ]

Exporting is a finance intensive activity. However, exporters may be confronted with domestic credit constrains and/or high costs of funding in domestic financial markets. This paper investigates whether foreign financing gives exporters better financing conditions and, through this channel, increases their prospects for export survival. For this purpose, it develops a simple theoretical model and performs empirical analysis by using a rich dataset on trade flows and financial characteristics of Argentine firms. In contrast with existing literature, our analysis relies on instrumental variables and can thus establish a causal impact of foreign credit on export survival. The results remain robust to the use of conventional survival analysis setups, such as probit random effects and clog-log duration models.