Which Firms Benefit More from Financial Development?

54 Pages Posted: 29 May 2008

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Stepan Jurajda

CERGE-EI; IZA Institute of Labor Economics; Academy of Sciences, Czech Republic

Date Written: July 2007

Abstract

We test whether more developed financial systems are better at tackling asymmetric information proxied by firm age and size. Comparing the growth effect of financial development (FD) across firms of different type, we find that FD disproportionately fosters the growth of young companies, while there is relatively little evidence of differences in the effect across firms of different size. The disproportionate gains from FD for youngest firms are concentrated among firms with lower shares of equity capital on total assets as these firms are in more need of external financing.

Keywords: Corporate growth, Financial development, Information Asymmetry

JEL Classification: F36, G15, G21, O16, O52

Suggested Citation

Bena, Jan and Jurajda, Stepan, Which Firms Benefit More from Financial Development? (July 2007). CEPR Discussion Paper No. DP6392, Available at SSRN: https://ssrn.com/abstract=1137073

Jan Bena (Contact Author)

University of British Columbia - Sauder School of Business ( email )

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Stepan Jurajda

CERGE-EI ( email )

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IZA Institute of Labor Economics

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Academy of Sciences, Czech Republic

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Economics Institute
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