Exporters and Credit Constraints: A Firm-Level Approach

Abstract

This paper analyses the interaction between credit constraints and trading behavior, decomposing trade in extensive and intensive margins. I construct a unique dataset containing firm-level trade transactions data, balance sheets and credit scores from an independent credit insurance company for Belgian manufacturing firms between 1999 and 2007. Firms are more likely to be exporting or importing if they enjoy lower credit constraints. Also, firms that have better credit rating export and import more, and more products. They export to more countries. Importing and exporting behavior differ in both the static and dynamic analysis of how various margins of trade are related to credit constraints in one important dimension. In the case of exports, it is the extensive margin of exports in terms of both product and destinations that are significantly associated with credit constraints whereas for imports it is the extensive margin in terms of products only.