FIRM SIZE DISTRIBUTION: DO FINANCIAL CONSTRAINTS EXPLAIN IT ALL? EVIDENCE FROM SURVEY DATA

Paolo Angelini () and Andrea Generale ()
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Andrea Generale: Bank of Italy, Economic Research Department

No 549, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research Department

Abstract: We address the question in the title using survey-based measures of financial constraints, as opposed to the proxies typically used in the literature. We find that in our dataset of Italian firms, those declaring to be financially constrained are smaller and younger than the others. However, the size distribution of non constrained firms is significantly skewed, and virtually overlaps with the FSD for the entire sample. Similar conclusions are drawn from the analysis of a large subsample comprising very young firms. These results are broadly confirmed using several non survey-based proxies of financial constraints, and over a second large sample including firms from OECD and non OECD countries. The analysis of the latter dataset suggests that financial constraints are a relatively more serious problem in developing countries. We conclude that financial constraints cannot be the main determinant of the FSD evolution over time, especially in financially developed economies.

Keywords: firm size distribution; financial constraints. (search for similar items in EconPapers)
JEL-codes: L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-fmk, nep-lab and nep-mic
Date: 2005-06
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