Working Paper: CEPR ID: DP6395
Authors: Jan Bena; Stepan Jurajda
Abstract: The establishment of the EU-15 `single market' in 1993 brought about a high degree of similarity in firms' growth opportunities across countries, while substantial diversity existed in the development of national financial markets. We compare within-industry growth rates of similar `single-market' firms facing financial systems of different depth and institutional quality as of 1993. Moving from the least to the most developed financial market within the EU-15 boosts firms' annual value-added growth by about three percentage points. Our results also suggest that the growth gap due to initially under-developed financial systems was closed by 2003.
Keywords: Access to financial markets; Corporate growth; Financial development
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-Level Growth (D25) |
| Initial Level of Financial Development (O16) | Subsequent Growth Rates of Comparable Firms (L25) |
| Underdeveloped Financial Systems (P34) | Growth Gap (O41) |
| Financial Markets Influence on Firm Growth (O16) | Growth Rates Convergence (O47) |