Firm Dynamics and Financial Development

Cristina Arellano, Yan Bai () and Jing Zhang ()

No 15193, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries.

JEL-codes: E22 F2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-ent and nep-mac
Date: 2009-07
Note: EFG IFM

Downloads: (external link)
http://www.nber.org/papers/w15193.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Firm dynamics and financial development (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:15193

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15193
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().