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The differentiated impacts of external and internal financing on export: the firm-level evidence

Xiangyuan Meng (Central University of Finance and Economics, Beijing, China)
Xue Li (Southwestern University of Finance and Economics, Chengdu, China)
Wenyan Xiao (ICBC, Beijing, China)
Jie Li (Central University of Finance and Economics, Beijing, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 20 May 2021

216

Abstract

Purpose

The authors provide firm-level evidence that external financing affects international trade in a way different from internal financing.

Design/methodology/approach

The authors separate new entrants from incumbent exporters and investigate the roles of external and internal financing in export market participation and export quantity.

Findings

The authors find that external financing is of particular importance, as well as internal financing, in helping a firm become a new exporter. By contrast, external financing, unlike internal financing, is not significantly important for an incumbent exporter to stay in the international market. Regarding export quantity, a firm's internal financing is positively associated with more export quantity, whereas external financing is not.

Originality/value

The authors’ findings are consistent with the existence of significant fixed cost for entering the export market and external financing is particularly needed to cover such cost. Meanwhile, the financial need for maintaining the export status is much less and can be satisfied via internal financing.

Keywords

Acknowledgements

Support from China National Social Science Fund (Project #: 20&ZD081, 18BJL106), National Natural Science Foundation of China (Project #: 61272193, 71903153) and Ministry of Education of China's Humanities and Social Science Research (Project #: 14JZD016, 17XJC790006) is gratefully acknowledged. Any remaining errors are the authors' responsibility.

Citation

Meng, X., Li, X., Xiao, W. and Li, J. (2021), "The differentiated impacts of external and internal financing on export: the firm-level evidence", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2020-1385

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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