Does export intensity of heterogeneous firms affect leverage? Evidence from a small open economy

Authors

  • Imran Ramzan DR
  • Ömer Lütfi Gebizlioglu

DOI:

https://doi.org/10.17811/ebl.12.4.2023.356-365

Keywords:

Leverage, Export Intensity, Financial Policy, GMM

Abstract

Exports at firm level improve the financial performance and thereby contribute to economic growth. Exporting activities require additional financing and become a challenge to manufacturing firms, thus affecting managerial financing decisions. This study explores the impact of export intensity on leverage by using a dataset of manufacturing firms. The results of two-step system GMM reveal that export intensity negatively influences the leverage. We find that a firm’s size positively impacts the leverage, while cash holding has a negative connection with leverage. Finally, we note that board size exhibits a positive relationship to leverage. These findings suggest important policy implications for export promotion, specifically for a small open economy. The results are robust to different sensitivity checks.

Author Biographies

Imran Ramzan, DR

Dr. Imran Ramzan completed his PhD Banking and Finance degree from Kadir Has University.

Ömer Lütfi Gebizlioglu

Prof. Dr. ÖMER LÜTFİ GEBİZLİOĞLU is a Professor and Head of Department of International Trade and Finance in Kadir Has University, Turkey.

References

Anderson, R., Mansi, S., and Reeb, D. (2004). Board characteristics, accounting report integrity and the cost of debt. Journal of Accounting and Economics, 37(3), 315-42.

Baltagi, B. H. (2005). Econometric Analysis of Panel Data, third ed. John Wiley & Sons, Ltd., West Sussex, England.

Bernard, B.A., and Jensen, B.J. (1999). Exceptional exporter performance: Cause, effect or both. Journal of International Economics, 47(1), 1–25.

Bernini, M., Guillou, S., and Bellone, F. (2015). Financial leverage and export quality: evidence from France. Journal of Banking and Finance, 59, 280–296.

Blundell, R., and Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.

Booth, L., Aivazian, V., Demirguc-Kunt, A. and Maksimovic, V. (2001). Capital structures in developing countries, The Journal of Finance, 6(1), 87-130.

Bridges, S., and Guariglia, A. (2008). Financial Constraints, Global Engagement, and Firm Survival in the United Kingdom: Evidence from Micro Data. Scottish Journal of Political Economy, 55(4), 444–64.

Chen, C., and Yu, C. (2011). FDI, export, and capital structure: an agency theory perspective. Management International Review, 51(3), 295–320.

Demirguc-Kunt, A., and Maksimovic, V. (1999). Institutions, financial markets, and firm debt maturity. Journal of Financial Economics, 54(3), 295-336.

Dixon, R. Guariglia, A. and Vijayakumaran, R. (2017). Managerial ownership, corporate governance and firms' exporting decisions: evidence from Chinese listed companies, The European Journal of Finance, 23:7-9, 802-840.

Flannery, M., and Hankins, K. (2013). Estimating dynamic panel models in corporate finance. Journal of Corporate Finance, 19, 1–19.

Greenaway, D. Guariglia, A. and Kneller, R. (2007). Financial factors and exporting decisions, Journal of International Economics, 73(2): 377-395.

Harris, M., and Raviv, A. (1991). The Theory of Capital Structure. The Journal of Finance. 46(1):297-355.

Hennart, J. F. (2007). The theoretical rationale for a multinationality-performance relationship. Management International Review, 47:423-452.

Hoechle, D. (2007). Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence. The Stata Journal, 7(3), 281-312.

Kuc, V., and Kalicanin, D. (2021). Determinants of the capital structure of large companies: Evidence from Serbia. Economic Research-Ekonomska Istraživanja, 34(1), 590-607.

Jensen, M., and Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3, 305–360.

Le, T.P.V., and Phan, T.B.N. (2017). Capital structure and firm performance: Empirical evidence from a small transition country. Research in International Business and Finance, 42, 710-726.

Minetti, R., and Zhu, C. (2011). Credit constraints and firm export: Microeconomic evidence from Italy. Journal of International Economics, 83, 109–125. doi:10.1016/j.jinteco.2010.12.004

Nagaraj, P. (2014). Financial constraints and export participation in India. International Economics, 140, 19–35.

Pinto, J. M., and Silva., C. (2021). Does export intensity affect corporate leverage? Evidence from Portuguese SMEs. Finance Research Letters, 38.

Rajan, R.G., and Zingales, L. (1995). What Do We Know About Capital Structure? Some Evidence from International Data. The Journal of Finance, 50(5), 1421-1460.

Roodman, D. (2009). How to do xtabond2: an introduction to difference and system gmm in stata. The Stata Journal, 9(1), 86-136.

Schwartz, E., and van Tassel, R.C. (1950). Some suggested changes in the corporate tax structure. The Journal of Finance, 5(4). 410-20.

Titman, S., and Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1–19.

Wintoki, M.B., Linck, J.S., and Netter, J.M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105 (3), 581–606.

Downloads

Published

15-12-2023

How to Cite

Ramzan, I., & Gebizlioglu, Ömer L. (2023). Does export intensity of heterogeneous firms affect leverage? Evidence from a small open economy. Economics and Business Letters, 12(4), 356–365. https://doi.org/10.17811/ebl.12.4.2023.356-365

Issue

Section

Articles