In this paper we investigate whether new exporter firms have a higher probability of starting to export to the countries where their financing banks have already established their branches.
The underlying mechanism we hypothesize is based on the transmission of foreign market knowledge from banks to firms, so as to cut down information barriers to international trade.
In those countries where such information is arguably more precious to the firm, we found a significant positive relationship between a firm’s probability of beginning to export to one market, and the presence in the same market of a branch of the firm’s financing bank. Coherently with the mechanism hypothesized, we find a stronger effect for closer firm-bank relationships, and when banks have established their branches abroad over a longer time period.
Published in 2017 in: Review of International Economics, v. 25, 3, pp. 476-499.