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Big data in finance and the growth of large firms

Author

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  • Begenau, Juliane
  • Farboodi, Maryam
  • Veldkamp, Laura

Abstract

Two modern economic trends are the increase in firm size and advances in information technology. We explore the hypothesis that big data disproportionately benefits big firms. Because they have more economic activity and a longer firm history, large firms have produced more data. As processor speed rises, abundant data attracts more financial analysis. Data analysis improves investors’ forecasts and reduces equity uncertainty, reducing the firm’s cost of capital. When investors can process more data, large firm investment costs fall by more, enabling large firms to grow larger.

Suggested Citation

  • Begenau, Juliane & Farboodi, Maryam & Veldkamp, Laura, 2018. "Big data in finance and the growth of large firms," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 71-87.
    • Handle: RePEc:eee:moneco:v:97:y:2018:i:c:p:71-87
    DOI: 10.1016/j.jmoneco.2018.05.013
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    References listed on IDEAS

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    More about this item

    Keywords

    Big data; Fintech; Firm size;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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