TY  - JOUR
AU  - Arellano,Cristina
AU  - Bai,Yan
AU  - Zhang,Jing
TI  - Firm Dynamics and Financial Development
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15193
PY  - 2009
Y2  - July 2009
UR  - http://www.nber.org/papers/w15193
L1  - http://www.nber.org/papers/w15193.pdf
N1  - Author contact info:
Cristina Arellano
Department of Economics
University of Minnesota
4-101 Hanson Hall
1925 Fourth Street South
Minneapolis, MN 55455
Tel: 612/625-0511
Fax: 612/204-5276
E-Mail: arellano.cristina@gmail.com

Yan Bai
University of Rochester
Department of Economics
216 Harkness Hall
Rochester, NY, 14627 
E-Mail: yanbai06@gmail.com

Jing Zhang
University of Michigan
Department of Economics
611 Tappan Street
Ann Arbor, MI 48109-1220
E-Mail: jzhang@umich.edu
AB  - This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries.
ER  -