Firm size and the interlinkages between sales volatility, exports, and financial stability of Pakistani manufacturing firms

This paper scrutinizes the interlinkages between exporting, sales growth volatility, and survival probabilities for Pakistani manufacturing firms. It also studies whether variations in firms' domestic sales induce them to start exporting and whether entry in foreign export markets helps reduce firms' bankruptcy chances. The results indicate that exporting helps firms in lessening sales growth volatility and enhances the likelihoods of firms' survival. The results also suggest that firms with higher sales growth volatility are more expected to be bankrupt. Yet, we show that they can reduce their chance of bankruptcy by starting exports. We also investigate whether these impacts are different between firms of different sizes. We find that compared to large-sized firms, both small- and medium-sized firms are more expected to start exporting to lessen domestic sales volatility. Finally, we observe that the volatility-lowering effects of exporting are higher for small-sized firms, whereas, the solvency-deterring effects of sales volatility are higher for large-sized firms.