Why Liquidity Matters to the Export Decision of the Firm
Under financial constraints, exporting may have less to do with productivity and more to do with financial resources. The established relationship between exporting and productivity would differ when examined through the lens of the working capital...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/04/19404022/liquidity-matters-export-decision-firm http://hdl.handle.net/10986/18331 |
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okr-10986-183312021-04-23T14:03:44Z Why Liquidity Matters to the Export Decision of the Firm Chan, Rosanna ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCIAL SERVICES ACCOUNTING ACCOUNTS RECEIVABLE AGGREGATE DEMAND ALLOCATION OF CREDIT AMOUNT OF CREDIT AVERAGE PRODUCTIVITY BINDING CONSTRAINT BOND BONDS BORROWING BORROWING REQUIREMENT BUDGET CONSTRAINT CASH ON HAND CD COLLATERAL COMMERCIAL BANKS COMPARATIVE ADVANTAGE CREDIT CARDS CREDIT CONSTRAINTS CREDIT LINE CREDIT LINES CURRENT ASSETS DEBT DEVELOPING COUNTRIES DEVELOPMENT POLICY DISCOUNT RATE DOMESTIC MARKET DOMESTIC MARKETS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EQUILIBRIUM MODELS EXCHANGE RATE EXPORTER EXPORTERS EXPORTS EXTERNAL BORROWING EXTRA WORKING CAPITAL FINANCES FINANCIAL ACCESS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INFORMATION FINANCIAL MARKETS FINANCIAL RESOURCES FINANCIAL SERVICES FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING NEEDS FIXED COST FIXED COSTS FOREIGN MARKETS FOREIGN-OWNED COMMERCIAL BANKS FUTURE RESEARCH GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODELS GLOBAL TRADE GOVERNMENT SUBSIDIES HOLDINGS HOUSEHOLD SAVINGS INFORMAL LENDERS INPUT PRICE INTEREST RATE INTEREST RATES INTERNAL FINANCE INTERNAL FINANCING INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MARKETS INTERNATIONAL SALES INTERNATIONAL TRADE INVENTORIES INVESTING INVESTMENT CLIMATE LENDERS LETTERS OF CREDIT LINE OF CREDIT LIQUIDITY LIQUIDITY CONSTRAINTS LOAN MARGINAL COST MARGINAL VALUE MONEY LENDER MONOPOLISTIC COMPETITION MOTIVATION OPPORTUNITY COST OPTIMIZATION OVERDRAFT OVERDRAFT FACILITIES OVERDRAFT FACILITY PHYSICAL CAPITAL POSITIVE COEFFICIENT PRESENT VALUE PRICE LEVELS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY INCREASES RATE OF RETURN RECEIPT RETAINED EARNINGS RETURNS SALES REVENUE SAVINGS SHORT-TERM DEBT SKILLED LABOR TERM CREDIT TOTAL COSTS TOTAL FACTOR PRODUCTIVITY TRADE CREDIT TRADE LIBERALIZATION TRANSACTION TRANSACTION COSTS TRANSPORT TURNOVER UNSKILLED LABOR VARIABLE COSTS WAGES WARRANTS WEALTH WORKING CAPITAL WTO Under financial constraints, exporting may have less to do with productivity and more to do with financial resources. The established relationship between exporting and productivity would differ when examined through the lens of the working capital needs of the firm. The hypothesis that working capital matters in the firm's exporting decision is explored in two ways: first, by articulating a dynamic working capital model of the firm that incorporates the firm's export decision. Secondly, by testing the hypothesis empirically using a unique firm level dataset from Bangladesh, where issues of financial constraints are particularly acute. The model shows that productivity determines export status of the firm as long as it is not under financial constraints. However, under financial constraints, export status is less dependent on productivity and more dependent on the availability of working capital. Empirical results support the model's prediction. The relationship between exporting time and the need for greater liquidity is also borne out empirically as shown by a positive and significant correlation between the amount of working capital and the distance of export destination. An important policy implication from the analysis is that short term liquidity is critical in allowing productive firms to export and that access to finance may prevent the benefits of trade liberalization within a country to be fully realized. 2014-05-14T22:02:58Z 2014-05-14T22:02:58Z 2014-04 http://documents.worldbank.org/curated/en/2014/04/19404022/liquidity-matters-export-decision-firm http://hdl.handle.net/10986/18331 English en_US Policy Research Working Paper;No. 6839 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research South Asia Bangladesh |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCIAL SERVICES ACCOUNTING ACCOUNTS RECEIVABLE AGGREGATE DEMAND ALLOCATION OF CREDIT AMOUNT OF CREDIT AVERAGE PRODUCTIVITY BINDING CONSTRAINT BOND BONDS BORROWING BORROWING REQUIREMENT BUDGET CONSTRAINT CASH ON HAND CD COLLATERAL COMMERCIAL BANKS COMPARATIVE ADVANTAGE CREDIT CARDS CREDIT CONSTRAINTS CREDIT LINE CREDIT LINES CURRENT ASSETS DEBT DEVELOPING COUNTRIES DEVELOPMENT POLICY DISCOUNT RATE DOMESTIC MARKET DOMESTIC MARKETS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EQUILIBRIUM MODELS EXCHANGE RATE EXPORTER EXPORTERS EXPORTS EXTERNAL BORROWING EXTRA WORKING CAPITAL FINANCES FINANCIAL ACCESS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INFORMATION FINANCIAL MARKETS FINANCIAL RESOURCES FINANCIAL SERVICES FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING NEEDS FIXED COST FIXED COSTS FOREIGN MARKETS FOREIGN-OWNED COMMERCIAL BANKS FUTURE RESEARCH GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODELS GLOBAL TRADE GOVERNMENT SUBSIDIES HOLDINGS HOUSEHOLD SAVINGS INFORMAL LENDERS INPUT PRICE INTEREST RATE INTEREST RATES INTERNAL FINANCE INTERNAL FINANCING INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MARKETS INTERNATIONAL SALES INTERNATIONAL TRADE INVENTORIES INVESTING INVESTMENT CLIMATE LENDERS LETTERS OF CREDIT LINE OF CREDIT LIQUIDITY LIQUIDITY CONSTRAINTS LOAN MARGINAL COST MARGINAL VALUE MONEY LENDER MONOPOLISTIC COMPETITION MOTIVATION OPPORTUNITY COST OPTIMIZATION OVERDRAFT OVERDRAFT FACILITIES OVERDRAFT FACILITY PHYSICAL CAPITAL POSITIVE COEFFICIENT PRESENT VALUE PRICE LEVELS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY INCREASES RATE OF RETURN RECEIPT RETAINED EARNINGS RETURNS SALES REVENUE SAVINGS SHORT-TERM DEBT SKILLED LABOR TERM CREDIT TOTAL COSTS TOTAL FACTOR PRODUCTIVITY TRADE CREDIT TRADE LIBERALIZATION TRANSACTION TRANSACTION COSTS TRANSPORT TURNOVER UNSKILLED LABOR VARIABLE COSTS WAGES WARRANTS WEALTH WORKING CAPITAL WTO |
| spellingShingle |
ACCESS TO CREDIT ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCESS TO FINANCIAL SERVICES ACCOUNTING ACCOUNTS RECEIVABLE AGGREGATE DEMAND ALLOCATION OF CREDIT AMOUNT OF CREDIT AVERAGE PRODUCTIVITY BINDING CONSTRAINT BOND BONDS BORROWING BORROWING REQUIREMENT BUDGET CONSTRAINT CASH ON HAND CD COLLATERAL COMMERCIAL BANKS COMPARATIVE ADVANTAGE CREDIT CARDS CREDIT CONSTRAINTS CREDIT LINE CREDIT LINES CURRENT ASSETS DEBT DEVELOPING COUNTRIES DEVELOPMENT POLICY DISCOUNT RATE DOMESTIC MARKET DOMESTIC MARKETS ECONOMIC DEVELOPMENT ECONOMIC GROWTH EQUILIBRIUM MODELS EXCHANGE RATE EXPORTER EXPORTERS EXPORTS EXTERNAL BORROWING EXTRA WORKING CAPITAL FINANCES FINANCIAL ACCESS FINANCIAL CRISIS FINANCIAL HEALTH FINANCIAL INFORMATION FINANCIAL MARKETS FINANCIAL RESOURCES FINANCIAL SERVICES FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING NEEDS FIXED COST FIXED COSTS FOREIGN MARKETS FOREIGN-OWNED COMMERCIAL BANKS FUTURE RESEARCH GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODELS GLOBAL TRADE GOVERNMENT SUBSIDIES HOLDINGS HOUSEHOLD SAVINGS INFORMAL LENDERS INPUT PRICE INTEREST RATE INTEREST RATES INTERNAL FINANCE INTERNAL FINANCING INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MARKETS INTERNATIONAL SALES INTERNATIONAL TRADE INVENTORIES INVESTING INVESTMENT CLIMATE LENDERS LETTERS OF CREDIT LINE OF CREDIT LIQUIDITY LIQUIDITY CONSTRAINTS LOAN MARGINAL COST MARGINAL VALUE MONEY LENDER MONOPOLISTIC COMPETITION MOTIVATION OPPORTUNITY COST OPTIMIZATION OVERDRAFT OVERDRAFT FACILITIES OVERDRAFT FACILITY PHYSICAL CAPITAL POSITIVE COEFFICIENT PRESENT VALUE PRICE LEVELS PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY INCREASES RATE OF RETURN RECEIPT RETAINED EARNINGS RETURNS SALES REVENUE SAVINGS SHORT-TERM DEBT SKILLED LABOR TERM CREDIT TOTAL COSTS TOTAL FACTOR PRODUCTIVITY TRADE CREDIT TRADE LIBERALIZATION TRANSACTION TRANSACTION COSTS TRANSPORT TURNOVER UNSKILLED LABOR VARIABLE COSTS WAGES WARRANTS WEALTH WORKING CAPITAL WTO Chan, Rosanna Why Liquidity Matters to the Export Decision of the Firm |
| geographic_facet |
South Asia Bangladesh |
| relation |
Policy Research Working Paper;No. 6839 |
| description |
Under financial constraints, exporting
may have less to do with productivity and more to do with
financial resources. The established relationship between
exporting and productivity would differ when examined
through the lens of the working capital needs of the firm.
The hypothesis that working capital matters in the
firm's exporting decision is explored in two ways:
first, by articulating a dynamic working capital model of
the firm that incorporates the firm's export decision.
Secondly, by testing the hypothesis empirically using a
unique firm level dataset from Bangladesh, where issues of
financial constraints are particularly acute. The model
shows that productivity determines export status of the firm
as long as it is not under financial constraints. However,
under financial constraints, export status is less dependent
on productivity and more dependent on the availability of
working capital. Empirical results support the model's
prediction. The relationship between exporting time and the
need for greater liquidity is also borne out empirically as
shown by a positive and significant correlation between the
amount of working capital and the distance of export
destination. An important policy implication from the
analysis is that short term liquidity is critical in
allowing productive firms to export and that access to
finance may prevent the benefits of trade liberalization
within a country to be fully realized. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Chan, Rosanna |
| author_facet |
Chan, Rosanna |
| author_sort |
Chan, Rosanna |
| title |
Why Liquidity Matters to the Export Decision of the Firm |
| title_short |
Why Liquidity Matters to the Export Decision of the Firm |
| title_full |
Why Liquidity Matters to the Export Decision of the Firm |
| title_fullStr |
Why Liquidity Matters to the Export Decision of the Firm |
| title_full_unstemmed |
Why Liquidity Matters to the Export Decision of the Firm |
| title_sort |
why liquidity matters to the export decision of the firm |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/04/19404022/liquidity-matters-export-decision-firm http://hdl.handle.net/10986/18331 |
| _version_ |
1764440646843629568 |