TY  - JOUR
AU  - Philippon,Thomas
TI  - Why Has the U.S. Financial Sector Grown so Much? The Role of Corporate Finance.
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13405
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13405
L1  - http://www.nber.org/papers/w13405.pdf
N1  - Author contact info:
Thomas Philippon
New York University
Stern School of Business
44 West 4th Street, Suite 9-190
New York, NY  10012-1126
Tel: 212/998-0490
Fax: 212/995-4233
E-Mail: tphilipp@stern.nyu.edu
AB  - The share of finance in U.S. GDP has been multiplied by more than three over the postwar period. I argue, using evidence and theory, that corporate finance is a key factor behind this evolution. Inside the finance industry, credit intermediation and corporate finance are more important than globalization, increased trading, or the development of mutual funds for explaining the trend. In the non financial sector, firms with low cash flows account for a growing share of total investment. I build a simple equilibrium model to capture these salient features and I use it to interpret the data. I find that corporate demand is the main contributor to the growth of the finance industry, but also that efficiency gains in finance have been important to limit credit rationing. Overall, the model can account for a bit more than half of the financial sector's growth.
ER  -