Fact of the Week: Firms That Received Support From the Export-Import Bank Experienced an 18 Percent Decrease in Sales During Its Closure
Source: Poorya Kabir et al., “EXIM’s Exit: The Real Effects of Trade Financing by Export Credit Agencies,” NBER Working Paper Series, No. w32019 (January 2024).
Commentary: A new working paper by Poorya Kabir et al. analyzed the effect of the temporary shutdown of the U.S. Export-Import Bank (EXIM) on exporting firms. As a result of a lapse in Congressional authorization, EXIM closed down between 2015 and 2019. Using data from Compustat, Datamyne, and EXIM, the study consisted of publicly traded firms between 2010 and 2019.
The authors mainly looked at the effects of EXIM’s closure on exporters’ sales. Overall, they found that firms that received support from EXIM saw a decrease in global sales of 18 percent during the closure period, due to an expected fall in exports. Similarly, firms that received large loans of over $10 million saw a 19 percent decrease in global sales, and those that received long-term loans saw a 20 percent decrease in global sales. The effects were especially significant for firms with products or goods that are easily substitutable with other goods. EXIM’s closure also negatively affected exporters in terms of capital stock, assets, and employment. For instance, firms that received EXIM support decreased their stocks of tangible and intangible capital by 16 percent and 18 percent respectively, with total assets declining by 13 percent. Additionally, employment decreased by 9 percent. These findings point to the critical role that export credit agencies in relieving financial frictions for exporters, and also point to the need for a renewed debate on the importance of government supports aimed at enhancing the competitiveness of traded sectors.