Work

Financial Markets and Firm Dynamics

Year: 2001

Type: article

Abstract: Recent studies have shown that the dynamics of firms (growth, job reallocation, and exit) are negatively correlated with the initial size of the firm and its age. In this paper we analyze whether financial factors, in addition to technological differences, are important in generating these dynamics. We introduce financial-market frictions in a basic model of industry dynamics with persistent shocks and show that the combination of persistent shocks and financial frictions can account for the simultaneous dependence of firm dynamics on size (once we control for age) and on age (once we control for size). (JEL D21, G3, L2)

Source: American Economic Review

DOI: 10.1257/aer.91.5.1286

Authors: Thomas F Cooley, Vincenzo Quadrini

Institutions: National Bureau of Economic Research, New York University, University of Southern California, Centre for Economic Policy Research

Language: English

Topic: Firm Innovation and Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W1554018098