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

Author

Listed:
  • 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.

Suggested Citation

  • Paolo Angelini & Andrea Generale, 2005. "Firm Size Distribution: Do Financial Constraints Explain It All? Evidence From Survey Data," Temi di discussione (Economic working papers) 549, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_549_05
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    References listed on IDEAS

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    Cited by:

    1. Anna M. Ferragina & Fernanda Mazzotta & Khalid Sekkat, 2016. "Financial constraints and productivity growth across the size spectrum: microeconomic evidence from Morocco," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 361-381, December.
    2. Vargas, Jose P Mauricio, 2012. "Binding Constraints: Does Firm Size Matter?," MPRA Paper 41286, University Library of Munich, Germany.
    3. Sandra M. Leitner, 2015. "Firm growth and financing constraints in the NMS-10 and the Western Balkan countries – a comparative analysis," wiiw Balkan Observatory Working Papers 115, The Vienna Institute for International Economic Studies, wiiw.
    4. Mr. Mauricio Vargas, 2015. "Identifying Binding Constraints to Growth: Does Firm Size Matter?," IMF Working Papers 2015/003, International Monetary Fund.
    5. Filipe Silva & Carlos Carreira, 2012. "Measuring Firms’ Financial Constraints: A Rough Guide," Notas Económicas, Faculty of Economics, University of Coimbra, issue 36, pages 23-46, December.
    6. Frederique Savignac, 2008. "Impact Of Financial Constraints On Innovation: What Can Be Learned From A Direct Measure?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(6), pages 553-569.
    7. Sandra M. Leitner & Robert Stehrer, 2016. "The Role of Financial Constraints for Different Innovation Strategies: Evidence for CESEE and FSU Countries," wiiw Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    8. Filipe Silva & Carlos Carreira, 2012. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 701-736, November.
    9. Sandra M. Leitner & Robert Stehrer, 2015. "What Determines SMEs’ Funding Obstacles to Bank Loans and Trade Credits?," wiiw Working Papers 114, The Vienna Institute for International Economic Studies, wiiw.
    10. Luís Cabral, 2007. "Small firms in Portugal: a selective survey of stylized facts, economic analysis, and policy implications," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 6(1), pages 65-88, April.
    11. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed‐term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
    12. A. Arrighetti & A. Ninni, 2009. "Firm size and growth opportunities: a survey," Economics Department Working Papers 2009-EP05, Department of Economics, Parma University (Italy).

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    More about this item

    Keywords

    firm size distribution; financial constraints.;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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