Lender Banks' Provision of Overseas Market Information: Evidence from Japanese small and medium-sized enterprises' export dynamics

Author Name INUI Tomohiko  (Faculty Fellow, RIETI) /ITO Keiko  (Senshu University) /MIYAKAWA Daisuke  (Nihon University)
Creation Date/NO. October 2014 14-E-064
Research Project Study on Corporate Finance and Firm Dynamics
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This paper examines how Japanese firms' export decision is affected by the availability of information on export markets, focusing on whether the availability of such information has a different impact on the export decision between large firms and small and medium-sized enterprises (SMEs). In contrast to existing studies which solely focus on information sharing among firms, we are interested in the role of firms' lender banks as an additional source of information. Specifically, using a unique dataset containing information not only on firms' export activities but also on their lender banks' exposure to other exporting firms as well as the lender banks' own overseas activities, we find that information provisions by lender banks positively affect SMEs' decision to start exporting and the range of destinations to which they export. Such information provisions from lender banks also reduce the likelihood that exporter firms exit from export markets. The export-to-sales ratio of exporter firms, however, is not affected by such information provisions. We also find that the importance of the information provisions by lender banks on SMEs' export decision crucially depends on the type of products (i.e., differentiated or homogeneous) produced in the industries to which the firms belong. These results imply that information on foreign markets provided by lender banks substantially reduces the fixed entry costs associated with starting exporting and entering new export markets as well as firms' costs associated with continuing to export.