Regional Financial Development and Firm Growth in Peru

Cristhian Seminario, Edgar Salgado and Eduardo Moron
Authors registered in the RePEc Author Service: Edgar Salgado and Edgar Salgado Chavez

No 4619, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper documents the relationship between regional financial development and firm growth in the Peruvian manufacturing sector. In order to control for mutual causality between credit availability and firm growth, industry differences in financial dependence on external funds are exploited. The 1994 and 2008 rounds of the National Economic Census are used, permitting analysis at the firm level as well as the activity level. Results suggest a significant and positive effect of financial deepening on surviving firms` growth. However, this effect is smaller for micro enterprises, suggesting that the cost of external funding decreases with financial development mainly for large firms. The conclusions remain unchanged when entering and exiting firms are included. The paper further finds that credit expansion have encouraged not only firm growth but also firm entry. The results are robust using an alternative measure of financial dependence.

Keywords: Firm growth; Manufacturing; Financial development (search for similar items in EconPapers)
JEL-codes: D22 D53 G21 L11 L60 O14 (search for similar items in EconPapers)
Date: 2013-06
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Related works:
Working Paper: Regional Financial Development and Firm Growth in Peru (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:4619

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