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The impact of financial constraints on firm survival and growth

Patrick Musso and Stefano Schiavo
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Patrick Musso: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur

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Abstract: We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996–2004 period, we find that (1) financial constraints significantly increase the probability of exiting the market, (2) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (3) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets.

Keywords: Financial constraints; Firm growth; Firm survival (search for similar items in EconPapers)
Date: 2008-04
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03417056
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Published in Journal of Evolutionary Economics, Springer Verlag (Germany), 2008, 18 (2), pp.135 - 149

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Related works:
Journal Article: The impact of financial constraints on firm survival and growth (2008) Downloads
Working Paper: The Impact of Financial Constraints on Firm Survival and Growth (2008)
Working Paper: The Impact of Financial Constaints on Firm Survival and Growth (2007) Downloads
Working Paper: The Impact of Financial Constraints on Firms Survival and Growth (2007) Downloads
Working Paper: The Impact of Financial Constraints on Firms Survival and Growth (2007) Downloads
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