Finance and trade: A cross-country empirical analysis on the impact of financial development and asset tangibility on international trade

This paper investigates the interplay between financial development, asset tangibility, and international trade. Using industry-level data on firms' dependence on external finance and firms' asset tangibility for 27 industries in 42 countries, we find that economies with higher levels of financial development have higher export shares and trade balance in industries with more intangible assets. Using the same dataset, we also show that the interplay between property-rights protection and asset tangibility influences the pattern of trade. Higher levels of property-rights protection lead to higher export shares and trade balance in industries with more intangible assets. (c) 2006 Elsevier Ltd. All rights reserved.