Working capital management, financial constraints and exports: evidence from European and US manufacturers

José Manuel Mansilla-Fernández; Juliette Milgram-Baleix

doi:10.1007/s00181-022-02295-5

Working capital management, financial constraints and exports: evidence from European and US manufacturers

Empir Econ. 2023;64(4):1769-1810. doi: 10.1007/s00181-022-02295-5. Epub 2022 Aug 23.

Authors

José Manuel Mansilla-Fernández^#¹, Juliette Milgram-Baleix^#²

Affiliations

¹ Department of Business Management and Institute for Advanced Research in Business and Economics (INARBE), Public University of Navarre (UPNA), Arrosadia Campus, 31006 Pamplona, Navarre Spain.
² Department of Economics Theory and Economic History, University of Granada, Campus Universitario de Cartuja, 10587 Granada, Granada Spain.

^# Contributed equally.

Abstract

This paper investigates the effect of firms' working capital management, measured by the cash conversion cycle (CCC) on exports, on both the intensive and extensive margins. By using Heckman's two-stage model for the treatment of sample selection bias, we find that the longer the CCC, the lower firms' likelihood of exporting and the lower the volume of their exports. This phenomenon is economically more relevant for financially constrained firms than for unconstrained firms. The results are robust to the propensity score matching, the transition sample and the placebo analyses. Finally, these results can be extrapolated in the context of the COVID-19 crisis because of the decline in trading conditions and firms' shortage of liquidity.

Keywords: COVID-19 crisis; Cash conversion cycle; Exports; Financial constraints; Working capital management.