ERIA-DP-2015-27 ERIA Discussion Paper Series Exporting and Firm-Level Credit Constraints – Evidence from Ghana Mai Anh NGO University of North Carolina at Chapel Hill March 2015 Abstract: 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 featrues 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 loand 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 signifincant form firms in the intermediate range of producitivity. These predicitons are suppoted by the empirical analysis of a longitudinal data set of Ghanaian firms and the empirical resluts are robust to various robustness checks.

Exporting and Firm-Level Credit Constraints - Evidence from Ghana

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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 loaned 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.

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ERIA-DP-2015-27

ERIA Discussion Paper Series

Exporting and Firm-Level Credit Constraints

Evidence from Ghana

Mai Anh NGO

University of North Carolina at Chapel Hill

March 2015

Abstract: 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 featrues firms with heterogeneity in

productivity, liquidity and collateral. It also models bankslending decisions

explicitly, allowing for endogenous firm default rate as well as allowing for the

loand interest rate to depend on firmscharacteristics. The model predicts that

credit access has a positive impact on firmsexport propensity and that this effect is

only signifincant form firms in the intermediate range of producitivity. These

predicitons are suppoted by the empirical analysis of a longitudinal data set of

Ghanaian firms and the empirical resluts are robust to various robustness checks.