The recent empirical literature on international trade provides us with the following three important results. First, firms are highly heterogeneous in terms of productivity. Heterogeneity of firms in the presence of fixed costs can explain why not all firms engage in international trade, why exporters are more productive than domestic producers, and why an important share of the variations in total exports comes from adjustments in the extensive margin of trade, i.e., in the number of exporters (Bernard and Jensen, 2004; Eaton et al., 2004; Melitz, 2003). Second, at the macro level, financial development has a significant and positive impact on bilateral trade flows (among others, see Beck, 2002; Berthou, 2006; Manova, 2008), both on the number of bilateral trade flows and the mean value of shipments. Thus, it could be argued that heterogeneity in terms of access to finance (within and between countries) and the availability of financial resources may be an important determinant of exporting behavior at the micro level. Third, at the micro level, there are several factors that could explain the differences in productivity among the companies and hence could be perceived as determinants of export activities at the firm level. In particular, human and management resources are often considered as the major determinants of firms’ export performance. Attitudes, perceptions and managerial characteristics seem to have a significant influence on export activities at the micro level. Starting with the pioneering paper by Greenaway et al. (2007), a growing number of empirical papers looked at the links between financial development, financial constraints and export activities using data at the firm level of analysis. While using different measures of financial constraints and applying different econometric methods to investigate the links between these constraints and export activities, most of these empirical studies focus on the link between credit constraints and export participation or the share of exports in total sales. Only 9 studies covering 5 single countries and 2 comparative studies covering several developing and emerging countries deal with the extensive margins of exports
the number of goods exported and the number of destination markets for export. Given that the extra costs of exporting often have to be paid for each export good and each destination country, we expect that credit constraints will be negatively related to the extensive margin. Studies of Belgium (MuÛls et al., 2008; MuÛls, 2015), France (Askenazy et al., 2011), Italy (Bottazzi et al., 2014; Forlani, 2010; Tamagni, 2013), Germany (Wagner, 2015) and China (Manova et al., 2015) report results that are in line with these hypotheses. In a recent study, Fauceglia (2015) examines whether financial development reduces the impact of credit constraints on export decisions using firm-level data across 17 developing countries. The regression analysis confirms that the positive effect of a firm’s liquidity on the exporting probability is larger for firms located in financially less developed countries. This result highlights the importance of financial development in reducing credit constraints. In a related study, Berman and Héricourt (2010) explore the interaction effect between financial development and credit constraints on export margins at the firm level using data for 9 developing and emerging economies. They find that a firm’s liquidity and leverage ratio, which are used to proxy for credit constraints, become stronger determinants of export participation as a country’s private credit to GDP ratio rises. These results contribute to the literature documenting the role of fixed costs and the extensive margin of trade in total trade adjustment, providing micro-level evidence of the positive impact of financial development on trade found in the previous literature.