ABSTRACT
This study uses a manufacturing firm-level panel data set of South Korea for 2006–2013 to investigate the effect of financial constraints on the export performance of firms, with particular emphasis on the corporate ownership structure. The empirical results show that foreign multinational corporation (MNC) subsidiaries are not affected by financial constraint during both crisis and noncrisis periods, implying advantages of foreign ownership. However, domestic firms suffer more from financial constraints on exports during crisis years. In particular, domestic firms without parent firms are financially constrained during both crisis and noncrisis periods. However, those with parent firms do not experience financial constraints during noncrisis periods, although they too suffer from them during crisis periods. Thus, parent–subsidiary linkage among domestic firms plays an important role in alleviating financial constraints on export activity in noncrisis years but not as much during crisis years. Therefore, domestic parent firms exhibit less resilience to the global financial crisis, in comparison to foreign MNC parent firms.
Acknowledgements
The author is grateful to participants at the 12th international conference of the Western Economic Association International (WEAI) in Singapore for their comments and suggestions.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 OECD defines foreign MNC subsidiaries as firms in which foreigners own more than 50% equity.
2 The assumption of random effects might be less likely to hold. However, in the panel data analysis with nonlinear models, the fixed-effects maximum likelihood estimator (MLE) is inconsistent and biased when the data has fixed time length and finite samples (Greene, Han, and Schmidt Citation2002).
3 The export ratio ranges from 0 to 1; therefore, left and right censoring is allowed.
4 It indicates the average marginal effects from the fitted model on the probability of exporting.