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...

Internal and sovereign debt crises occur together and happen more frequently in economies with weak bankruptcy institutions. This paper provides a novel explanation. Internal crises arise because of the inability to liquidate private debtors when many default. In an optimal contract, a...