Working Paper: CEPR ID: DP6392
Authors: Jan Bena; Stepan Jurajda
Abstract: We test whether more developed financial systems are better at tackling asymmetric information proxied by firm age and size. Comparing the growth effect of financial development (FD) across firms of different type, we find that FD disproportionately fosters the growth of young companies, while there is relatively little evidence of differences in the effect across firms of different size. The disproportionate gains from FD for youngest firms are concentrated among firms with lower shares of equity capital on total assets as these firms are in more need of external financing.
Keywords: corporate growth; financial development; information asymmetry
JEL Codes: F36; G15; G21; O16; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial development (O16) | firm growth (L26) |
| financial development (O16) | growth of young companies (L26) |
| firm characteristics (age) (L25) | financial development effect on growth (O16) |
| lower equity capital shares (G32) | greater benefit from financial development (O16) |
| firm age (L10) | growth effect of financial development (O16) |
| young firms (M13) | weaker positive effect from financial development (O16) |
| financial constraints (information asymmetry) (D82) | growth benefits from financial development (O16) |