Essays on effects of financial institutions on industrial development.

摘要

I find that the impact of financial institutions is highly non-uniform across firms and industries, and affected by competitive dynamics within the industry. I provide empirical evidence based on a large data set of Western European firms that includes small, privately-owned firms. I find that with better financial development: small firms grow faster and large firms grow slower; and the relative size of large versus small firms shrinks. Industries most affected have higher capital intensity (as this raises investment needs) and/or higher elasticity of demand (as this strengthens the reaction of the less financially constrained firms to the more financially constrained firms). The results could be driven by financial institutions aiding firm entry and growth, and/or restructuring and exit: I provide evidence for both of these channels of impact. On entry and growth, I develop a model of an industry in which financial development affects firm investment and growth, and hence industry growth. Reconciling the model comparative static results with the empirical literature suggests that a key effect of financial institutions is access to equity finance for smaller firms. On exit and restructuring, I consider how the impact of Italian bankruptcy law on firm restructuring varies across industries. I take a case study approach, finding the effects are strongest for firms: in industries in which assets are largely specific to the firm and of intermediate length of economic life (e.g., machines and equipment); and for firms requiring operational restructuring as well as financial restructuring.