Finance Over the Life Cycle of Firms

Federico Kochen ()
Additional contact information
Federico Kochen: CEMFI and Banco de España, https://www.cemfi.es/

Working Papers from CEMFI

Abstract: This paper documents significant differences in firms’ use of debt and equity financing over their life cycles and across countries at different stages of development. I interpret this evidence using a model with learning and financial frictions, in which younger firms rely more on external financing while facing greater uncertainty and risk. The model predicts sizable aggregate losses from financial frictions, larger in less developed countries. Unlike previous work, I find that most of the TFP losses arise from distortions in firms’ exit decisions, reflecting that young firms exit prematurely as external financing costs exceed the option value of learning.

Keywords: Learning; financial frictions; firm dynamics; exit; misallocation. (search for similar items in EconPapers)
JEL-codes: E43 E44 G30 O47 (search for similar items in EconPapers)
Date: 2025-09
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:cmf:wpaper:wp2025_2518

Access Statistics for this paper

More papers in Working Papers from CEMFI Contact information at EDIRC.
Bibliographic data for series maintained by Araceli Requerey ().