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Financial constraints and firm Dynamics

Abstract : This study analyzes the effect of financial constraints (FCs) on firm dynamics. We measure FCs with an official credit rating, which captures availability and cost of external resources. We find that FCs undermine average firm growth, induce anti-correlation in growth patterns, and reduce the dependence of growth volatility on size. FCs are also associated with higher volatility and asymmetries in growth shock distributions, preventing young fast-growing firms especially from seizing attractive growth opportunities and further deteriorating the growth prospects of already slow-growing firms, particularly if old. The sub-diffusive nature of the growth process of constrained firms is compatible with the distinctive properties of their size distribution.
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Contributor : Angelo Secchi Connect in order to contact the contributor
Submitted on : Thursday, April 10, 2014 - 9:10:30 AM
Last modification on : Friday, April 29, 2022 - 10:13:02 AM



Giulio Bottazzi, Angelo Secchi, Federico Tamagni. Financial constraints and firm Dynamics. Small Business Economics, 2014, 42, pp.99-116. ⟨10.1007/s11187-012-9465-5⟩. ⟨hal-00976545⟩



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