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The Impact of Financial Constraints on Firm Exports: A Case Study of Manufacturing Firms in Iran

Fakhr Fatemi, Mahdi | 2024

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 58231 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Madani Zadeh, Ali; Mahmoud Zadeh, Amineh
  7. Abstract:
  8. Exporting firms face a range of challenges when entering international markets, among which financial constraints are particularly significant. Financial constraints can impair a firm’s cash flow, making it difficult to finance the fixed costs associated with export market entry. This study constructs a firm-level index to measure the degree of financial constraint and examines its impact first on the probability of export participation, and then on the volume of exports. The analysis is based on data from Iran’s industrial firms between 2008 and 2019 (1387–1398 in the Iranian calendar). The effect of financial constraints on the probability of exporting is estimated using logit and linear probability models, while the impact on export intensity is analyzed using panel regressions with two dependent variables: the export-to-sales ratio and the logarithm of exports. To address potential sample selection bias, the regressions are re-estimated using the Heckman correction procedure. The findings confirm a negative effect of financial constraints on the likelihood of exporting, particularly for firms with no prior export experience. On average, the probability of export participation among Iranian manufacturing firms is 7.7 percent, and the presence of financial constraints is estimated to reduce this probability by 0.3 percentage points. The results also show that while financial constraints negatively affect export volume, the effect is less pronounced among established exporters than among new entrants
  9. Keywords:
  10. Iran Economy ; Financial Constraint ; Value Added Tax (VAT) ; Export ; Manufacturing Firms ; Manufacturing Establishments

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