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Small and Large Firms Over the Business Cycle

Nicolas Crouzet and Neil R. Mehrotra

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Drawing on a new, con dential Census Bureau dataset of financial statements of a representative sample of 80000 manufacturing firms from 1977 to 2014, we provide new evidence on the link between size, cyclicality, and financial frictions. First, we only find evidence of lower cyclicality among the very largest firms (the top 1% by size). Second, due to high and rising concentration of sales and investment, the lower sensitivity of the top 1% firms dominates the behavior of aggregate fluctuations. Third, we show that this differential sensitivity does not appear to be driven by financial frictions. The higher sensitivity of the bottom 99% does not disappear after controlling for measures of financial strength, is not statistically significant after identified monetary policy shocks, and does not appear in debt financing flows. Evidence from 3-digit industries suggests a non-financial explanation: the largest 1% of firms are less sensitive due to a more diversified customer base.

Keywords: Firm size; business cycles; financial accelerator. (search for similar items in EconPapers)
JEL-codes: E23 E32 G30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-sbm
Date: 2018-02
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https://www2.census.gov/ces/wp/2018/CES-WP-18-09.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:18-09

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