Exporting and Firm-Level Credit Constraints - Evidence from Ghana
This paper models how firms finance their fixed costs of exporting through internal financing from retained earnings and external financing (borrowing from banks). The theoretical model features firms with heterogeneity in productivity, liquidity and collateral. It also models banks' lending decisions explicitly, allowing for endogenous firm default rate as well as allowing for the loan interest rate to depend on firms' characteristics. The model predicts that credit access has a positive impact on firms' export propensity and that this effect is only significant form firms in the intermediate range of productivity. These predictions are supported by the empirical analysis of a longitudinal data set of Ghanaian firms and the empirical results are robust to various robustness checks.