Financing constraints and exports: evidence from India

This paper investigates the effect of financing constraints on the extensive and intensive margins of exports using a rich firm-level data on Indian manufacturing firms. Following the literature, we adopt liquidity ratio and leverage ratio as the measures of financing constraints and control for other firm-level factors. Controlling for initial conditions, endogeneity, and selection bias, we find that financing constraints have a significant impact on the extensive margin of exports. Using Propensity Score Matching –Differences in Differences approach, we find significant post-entry effects of exports on firm financial performance.