Using a large unbalanced panel data set of Portuguese manufacturing firms surviving over the period from 1990 to 2001, the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth. We use a GMM-system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth. The model is estimated for all size classes, including micro firms. Our findings suggest that smaller and younger firms have higher growth-cash flow sensitivities than larger and more mature firms. This is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms. Finally, firms that were small and young and strongly liquidity-constrained at the beginning of the sample period exhibited more persistent growth than those that were large and old and weakly liquidity-constrained. These results have significant policy implications.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number
2005-07.
Length: 36 pages Date of creation: 2005 Date of revision: Publication status: Published in Small Business Economics, 27(2), 2006, pages 139-156 Handle: RePEc:gmf:wpaper:2005-07
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999.
"What Determines Firm Size?,"
NBER Working Papers
7208, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, .
"What Determines Firm Size?,"
CRSP working papers
496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)