Equity Frictions and Firm Ownership

Alessandra Peter

No 34301, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, I document systematic heterogeneity in ownership and financing of firms across Eurozone countries. To rationalize these differences, I build a quantitative general equilibrium model of workers and entrepreneurs who choose debt and equity financing of their firms, subject to rich country-specific financial frictions. The novel data on firm ownership and financing, combined with the structure of the model, allows me to quantify the level of debt and equity frictions in each country. Quantitatively, I find much larger output effects from equity frictions: harmonizing them across countries would lead to nearly four times larger output effects compared to debt frictions, and removing them would increase aggregate output by 75\% more. The larger impact on output is due not only to the estimated levels and dispersion of equity frictions, but also to the fact that equity provides greater risk sharing, which further incentivizes entrepreneurs to expand their firms. Through their effect on risk sharing, equity frictions also rationalize the observed negative relationship between equity financing and wealth inequality. Quantitatively, they are responsible for over 70\% of the explained variation in top wealth shares across countries.

JEL-codes: E02 E44 G32 (search for similar items in EconPapers)
Date: 2025-09
Note: EFG
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34301.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. Free access is also available to older working papers.

Related works:
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: https://EconPapers.repec.org/RePEc:nbr:nberwo:34301

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34301
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 National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().