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Where Are the Fragilities? The Relationship Between Firms' Financial Constraints, Size, and Age


  • Carlos Carreira

    () (GEMF and Faculty of Economics, University of Coimbra)

  • Filipe Silva

    (GEMF and Faculty of Economics, University of Coimbra)


Recessions and financial crisis increase financial constraints and disproportionally affect constrained firms. This paper investigates the differences in firms’ financial constraints between sectors using a cash to cash-flow rationale (Almeida et al., 2004) and a firm specific index of constraints (Hovakimien and Hovakimien, 2009). Interpreting higher sensitivities of cash to cash flow as evidence of higher constraints, we find that the relationships between firm size, firm age and constraints are, in general, non-monotonic and not robust to economic sector disaggregation, which contrasts with previous findings.

Suggested Citation

  • Carlos Carreira & Filipe Silva, 2012. "Where Are the Fragilities? The Relationship Between Firms' Financial Constraints, Size, and Age," GEMF Working Papers 2012-12, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2012-12

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    References listed on IDEAS

    1. Ang, James & Smedema, Adam, 2011. "Financial flexibility: Do firms prepare for recession?," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 774-787, June.
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    More about this item


    Financial constraints; Financial crises; Firm size; Firm age; Firm-level studies; Portugal.;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L00 - Industrial Organization - - General - - - General
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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