DP6392 Which Firms Benefit More from Financial Development?

Author(s): Jan Bena, Stepan Jurajda
Publication Date: July 2007
Keyword(s): Corporate growth, Financial development, Information Asymmetry
JEL(s): F36, G15, G21, O16, O52
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6392

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.