Firm Size Distribution: Do Financial Constraints Explain it All? Evidence from Survey Data

41 Pages Posted: 4 May 2008 Last revised: 28 May 2009

Abstract

We address the question in the title using survey-based measures of financial constraints, as opposed to the proxies typically used in the literature. We find that in our dataset of Italian firms, those declaring to be financially constrained are smaller and younger than the others. However, the size distribution of non constrained firms is significantly skewed, and virtually overlaps with the FSD for the entire sample. Similar conclusions are drawn from the analysis of a large subsample comprising very young firms. These results are broadly confirmed using several non survey-based proxies of financial constraints, and over a second large sample including firms from OECD and non OECD countries. The analysis of the latter dataset suggests that financial constraints are a relatively more serious problem in developing countries. We conclude that financial constraints cannot be the main determinant of the FSD evolution over time, especially in financially developed economies.

Keywords: firm size distribution, financial constraints

JEL Classification: l11

Suggested Citation

Angelini, Paolo and Generale, Andrea, Firm Size Distribution: Do Financial Constraints Explain it All? Evidence from Survey Data. Bank of Italy Temi di Discussione (Working Paper) No. 549. Available at SSRN: https://ssrn.com/abstract=1015094 or http://dx.doi.org/10.2139/ssrn.1015094

Paolo Angelini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Generale

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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