Volatility, financial constraints, and trade

García-Vega, M., Guariglia, A. and Spaliara, M.E. (2012) Volatility, financial constraints, and trade. International Review of Economics and Finance, 21(1), pp. 57-76. (doi:10.1016/j.iref.2011.05.003)

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Abstract

We construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms’ earnings volatility, their degree of financial constraints, their survival probabilities, and their export market participation decisions. Our model predicts that more volatile firms are more likely to face financial constraints and to go bankrupt, need to be more productive to stay in the market, and have more incentives to enter export markets. A further implication is that through market diversification, exports tend to stabilize firms’ total sales. We test these predictions, using a panel of 23,674 UK manufacturing firms over the period 1993-2006.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Spaliara, Dr Marina Eliza
Authors: García-Vega, M., Guariglia, A., and Spaliara, M.E.
Subjects:H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:International Review of Economics and Finance
ISSN:1059-0560

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