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Credit Constraints and Decisions in Exports: Theory under Asymmetric Information
Key Laboratory of International Commodity Transaction Analysis and Simulation, Liaoning University of International Business and Economics, Dalian, China
- 1 Key Laboratory of International Commodity Transaction Analysis and Simulation, Liaoning University of International Business and Economics, Dalian, China
Journal of Mathematical Finance·Volume 02 (2012)·Pages 238–242·Published 31 August 2012·DOI10.4236/jmf.2012.23026
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Abstract
This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms’ productivities. To maintain incentive-compatibility, banks lend below the amount needed for first-best production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms, even in the exporters’ home market. Greater risk faced by exporters also affects the credit extended by banks. Extra fixed costs reduce exports on the extensive margin, but can be offset by collateral held by exporting firms.
KeywordsCredit ConstraintsAsymmetric InformationHeterogeneous Productivity
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