Financial Development, Fixed Costs, and International Trade

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Oxford Journals Contact Us My Basket My Account Review of Corporate Finance Studies About This Journal Contact This Journal Subscriptions View Current Issue (Volume 2 Issue 1 March 2013) Archive Search Oxford Journals EconomicsSocial Sciences Review of Corporate Finance Studies Volume 2 Issue 1 Pp. 1-28. Financial Development, Fixed Costs, and International Trade Bo Becker

Harvard Business School and NBER Jinzhu Chen

Chinese Academy of Social Sciences David Greenberg

BlackRock, Inc. Send correspondence to Bo Becker, Harvard Business School, Boston, MA 02163, USA; telephone: 617-496-5335. E-mail: bbecker{at}hbs.edu. Abstract Exports require significant up-front costs in product design, marketing, and distribution. These are intangible, firm-specific investments that are likely difficult to finance externally. We argue that a developed financial system can therefore facilitate exports. We test this prediction and find support for it. First, financial development is associated with more exports in industries in which fixed costs are high as well as to importers that require high costs. Second, trade dynamics are affected by financial development. In countries with better finance, exports are more sensitive to exchange rates. Finally, we predict and document that countries with more developed finance experience more volatile exports. (JEL F14, F36, G20, G30)

© The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com. « Previous | Next Article » Table of Contents This Article Review of Corporate Finance Studies (2013) 2 (1): 1-28. doi: 10.1093/rcfs/cfs005 First published online: November 28, 2012 » Abstract Full Text (HTML) Full Text (PDF) All Versions of this Article: cfs005v1 2/1/1 most recent Classifications Articles Services Alert me when cited Alert me if corrected Find similar articles Similar articles in Web of Science Add to my archive Download citation Request Permissions Citing Articles Load citing article information Citing articles via CrossRef Citing articles via Scopus Citing articles via Web of Science Google Scholar Articles by Becker, B. Articles by Greenberg, D. Search for related content Related Content Load related web page information Share Email this article CiteULike Delicious Facebook Google+ Mendeley Twitter What's this?

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