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Firm Size Distribution: Do Financial Constraints Explain It All? Evidence From Survey Data

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  • Paolo Angelini

    ()
    (Bank of Italy, Economic Research Department)

  • Andrea Generale

    ()
    (Bank of Italy, Economic Research Department)

Abstract

We address the question in the title using survey-based measures of financial constraints, as opposed to the proxies typically used in the literature. We find that in our dataset of Italian firms, those declaring to be financially constrained are smaller and younger than the others. However, the size distribution of non constrained firms is significantly skewed, and virtually overlaps with the FSD for the entire sample. Similar conclusions are drawn from the analysis of a large subsample comprising very young firms. These results are broadly confirmed using several non survey-based proxies of financial constraints, and over a second large sample including firms from OECD and non OECD countries. The analysis of the latter dataset suggests that financial constraints are a relatively more serious problem in developing countries. We conclude that financial constraints cannot be the main determinant of the FSD evolution over time, especially in financially developed economies.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 549.

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Date of creation: Jun 2005
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Handle: RePEc:bdi:wptemi:td_549_05

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Keywords: firm size distribution; financial constraints.;

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References

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Cited by:
  1. Savignac, F., 2007. "The impact of financial constraints on innovation: What can be learned from a direct measure?," Working papers 169, Banque de France.
  2. Filipe Silva & Carlos Carreira, 2012. "Measuring Firms' Financial Constraints: A Rough Guide," GEMF Working Papers 2012-14, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Andrea Caggese & Vicente Cuñat, 2005. "Financing Constraints and Fixed-Term Employment Contracts," Working Papers 266, Barcelona Graduate School of Economics.
  4. Luís Cabral, 2007. "Small firms in Portugal: a selective survey of stylized facts, economic analysis, and policy implications," Portuguese Economic Journal, Springer, vol. 6(1), pages 65-88, April.

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