Capital Market Financing and Firm Growth
This paper studies whether there is a connection between finance and growth at the firm level. It employs a new dataset of 150,165 equity and bond issuances around the world, matched with income and balance sheet data for 62,653 listed firms in 65...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/879651595862883790/Capital-Market-Financing-and-Firm-Growth http://hdl.handle.net/10986/34255 |
| Summary: | This paper studies whether there is a
connection between finance and growth at the firm level. It
employs a new dataset of 150,165 equity and bond issuances
around the world, matched with income and balance sheet data
for 62,653 listed firms in 65 countries over 1990-2016.
Three main patterns emerge from the analyses. First, firms
that choose to issue in capital markets use the funds raised
to grow by enhancing their productive capabilities,
increasing their tangible and intangible capital and the
number of employees. Growth accelerates as firms raise
funds. Second, the faster growth is more pronounced among
firms that are more likely to face tighter financing
constraints, namely, small, young, and high-R&D firms.
Third, capital market issuances are associated with faster
growth among firms located in countries with more developed
capital markets relative to banks. Capital markets are also
comparatively effective at allowing financially constrained
firms to raise capital. |
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