Financial Markets and Firm Dynamics

33 Pages Posted: 12 Nov 2008

See all articles by Thomas F. Cooley

Thomas F. Cooley

New York University - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1999

Abstract

Recent studies have shown that the dynamics of firms (growth, job relocation and exit) are negatively associated with the firm's size. In this paper we analyze whether financial factors are important in generating this negative relation. We develop a model in which, at each point in time, firms are heterogeneous in the amount of equity, and the equity affects their financing decision. The production and investment behavior of small and large firms differs substantially, and the model replicates many of the key features of industry evolution: smaller firms experience faster growth, higher rates of job creation and destruction and lower survival rates.

Suggested Citation

Cooley, Thomas F. and Quadrini, Vincenzo, Financial Markets and Firm Dynamics (September 1999). NYU Working Paper No. S-MF-99-09. Available at SSRN: https://ssrn.com/abstract=1300261

Thomas F. Cooley (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

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National Bureau of Economic Research (NBER)

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Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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