Financial constraints, firm dynamics and productivity

Karim Foda, Yu Shi and Maryam Vaziri

Applied Economics Letters, 2025, vol. 32, issue 10, 1439-1447

Abstract: This paper studies the relationship between financial constraints, firm dynamics and productivity. Using Lithuanian firm-level data from 2000 to 2018, we construct a measure of financial constraints that elicits information from multiple balance-sheet variables. We estimate that a 1% fall in the average degree of financing constraints improves average productivity by 0.48%. Our results further uncover novel trends on the relationship of financial constraints and firm-age and size.

Date: 2025
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DOI: 10.1080/13504851.2024.2306180

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