Working Paper: NBER ID: w20336
Authors: Tatiana Didier; Ross Levine; Sergio L. Schmukler
Abstract: Which firms issue equity and debt in domestic and international markets and what happens to their assets, sales, and number of employees? To answer these questions, we assemble a new dataset on firm-level capital raising activity during 1991-2011, which we match with firm attributes for 45,527 listed firms from 51 economies during 2003-2011. We find that only a few of the largest firms issue securities in the median country. Firms issuing bonds are even larger than those issuing equity. Moreover, issuers grow much faster than non-issuers, particularly (a) during the year of issuance, (b) among smaller and younger firms, and (c) in countries with market-based financial systems. Furthermore, the firm size distribution (FSD) of issuers behaves differently from that of non-issuers. Among issuers, smaller firms grow faster than larger ones, tightening their FSD; but among non-issuers, larger firms grow faster than smaller ones, widening their FSD.
Keywords: capital markets; firm growth; securities issuance
JEL Codes: F65; G15; G30; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firms that issue securities (G24) | grow significantly faster than nonissuers (G24) |
| Issuing firms (G24) | experience a significant boost in assets, sales, and employment in the year of issuance (G24) |
| Smaller issuing firms (G24) | exhibit faster growth relative to larger issuing firms (G24) |
| Nonissuing firms (G24) | display a widening firm size distribution (FSD) as larger firms grow faster than smaller ones (L25) |
| Growth differential (O49) | larger in market-based financial systems (G19) |
| Issuing securities (G24) | facilitate growth opportunities (O35) |