Trade Liberalization, Profitability, and Financial Leverage - ARCHIVED

Articles and reports: 11F0019M2005256


We investigate whether trade liberalization affects profitability and financial leverage, using Canadian data from the period following implementation of the Canada-U.S. Free Trade Agreement. We find that falling domestic tariffs are associated with declining profits and increasing leverage for import-competing firms, while falling foreign tariffs are associated with increasing profits and decreasing leverage for firms in export-oriented industries. This pattern is consistent with the "pecking order" theory of capital structure.

Issue Number: 2005256
Author(s): Baggs, Jennifer; Brander, James A.
FormatRelease dateMore information
PDFJune 22, 2005