Journal of Monetary Economics volume 59, issue 6, P533-549 2012 DOI: 10.1016/j.jmoneco.2012.06.006 View full text
Cristina Arellano, Yan Bai, Jing Zhang

Abstract: a b s t r a c tUsing comprehensive firm-level datasets, this paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth. In less financially developed economies, small firms grow faster and have lower leverage than large firms. As financial development improves, the growth difference between small and large firms shrinks, while the leverage difference rises. The paper then develops a quantitative model where financial frictions drive firm growth …

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