Financial Dependence and Exports : Entrants or Incumbents?

This paper explores the impact of financial development on exporting, focusing on the differential impact between incumbent firms and new entrants. Using firm-level customs data from 51 countries we confirm the result from the literature that sectors that are more dependent on external finance have relatively higher exports in countries that have more developed financial markets. We show that this effect occurs entirely through new entrants, with no effect found for incumbents. The trade response of entrants works primarily through the extensive margin (number of exporters) rather than the intensive margin (average size), and this margin of response is much larger for entrants than for incumbents. Also, we find that periods of banking crises generate no greater reduction in trade than we would expect during normal periods. Finally, we find that access to the finance increases exporter entry rates while it does not affect exporter exit, survival rates, product and destination entry rates of incumbents and surviving entrants