case the result on the banking crisis interaction is not substantially affected confirming there is a separate effect of a banking crisis on export growth.<sup>12</sup>

# **4.7.2 Alternative measures of external dependence and tangibility**

The measure of external finance dependence as computed by Rajan and Zingales (1998) might not always be ideal. For example when looking at developing countries one could argue that using the data of mature firms in the US might not give the best benchmark. Therefore, directly from Rajan and Zingales (1998) we take the same type of measure but only computed for the young firms that are likely to resemble more the firms in developing countries composing a big part of our sample. In addition, this measure might also be more appropriate because firms tend to rely much more on external finance in their early life. The first column in the top panel of Table 13 shows that even though the coefficient on the main interaction weakens slightly the results are qualitatively unchanged. A second concern that one might have with using US data is that a country that has itself experienced a financial crisis might not be the best frictionless benchmark. Therefore, our second alternative is based on Kroszner, Laeven, and Klingebiel (2007) who again compute the same measure but based only on data of countries that have never experienced a financial crisis. Here again, as shown in column 2, the results are very similar to the ones from our benchmark regressions. To provide additional testing of whether the dependence on external finance really matters in last two columns we employ two additional measures both originally developed by Raddatz (2006): cash conversion cycle and inventories to sales. These measures are meant to provide a proxy for more short term financial needs required to cover mainly the working capital. When we use these additional proxies interacted with financial crisis our main coefficients remain negative and significant but becomes smaller than when we use the original measure. This suggests that it is particularly the long term financing that is hurt during a crisis which is consistent with our finding using the Fisman and Love (2003) trade credit measure.

We do a similar set of tests for the tangibility measure. This variable is inherently different from the external finance dependence and therefore we use a different set of proxies to check its robustness. We take the alternative measures from Braun (2003). He similarly as Kroszner, Laeven, and Klingebiel (2007) uses the book value of the property, plant and equipment in total assets as the benchmark measure. However, he only constructs it at the 3 digit ISIC level and for the period 1985-1995. For comparison we report the result of our benchmark regression using this new definition of tangibility (see bottom part of Table 13). The coefficient is slightly lower in its magnitude but the result is consistent with our previous findings. To better capture

> 12The positive sign on the interaction between GDP growth and external dependence from finance can be both a consequence of the larger pro-cyclicality of sectors highly dependent from finance as well as a spurious result due to the fact that exports are a component of GDP by construction.

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