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Access to Capital Markets and the Geography of Productivity Leaders and Laggards

Giorgio Barba Navaretti () and Anna Rosso ()
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Giorgio Barba Navaretti: University of Milan
Anna Rosso: University of Milan

No 469, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper examines whether access to the capital market of convertible and non-convertible bonds affects total factor productivity (TFP) for the population of Italian joint stock manufacturing companies, based in highly segmented local financial markets, between 2007 and 2017. The hypothesis, well grounded in the literature, is that long term capital favours investment in intangibles and other risky assets necessary for productivity growth. In order to identify this effect, we exploit the exogenous shock of the Italian banking deregulation of the mid-Nineties as an instrument for firm level access to capital, interacted with distance from logistic networks. These reforms changed the distribution of the type of branches at the local level, increasing the share of joint stock banks, which have high connections to international capital markets. This geographical reallocation of banking activities ultimately affected firms’ financial structure, favouring their access to capital, even when based in peripheral financial areas. Firms which issued instruments of market debt achieved higher levels of productivity and a higher probability to reach top percentiles of productivity distribution.

Keywords: Productivity; Bank Liberalization; logistic networks dynamics (search for similar items in EconPapers)
JEL-codes: G21 O4 R1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-eff, nep-eur, nep-fdg and nep-geo
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