Firm dynamics and financial development
Using comprehensive firm-level datasets, this paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth. In less financially developed economies, small firms grow faster and have lower leverage than large firms. As financial development improves, the growth difference between small and large firms shrinks, while the leverage difference rises. The paper then develops a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. The model explains the observed cross-country variations in firm size, leverage and growth in response to changes in financial frictions.
Year of publication: |
2012
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Authors: | Arellano, Cristina ; Bai, Yan ; Zhang, Jing |
Published in: |
Journal of Monetary Economics. - Elsevier, ISSN 0304-3932. - Vol. 59.2012, 6, p. 533-549
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Publisher: |
Elsevier |
Saved in:
Online Resource
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