ABSTRACT
From capital investment (Bond et al., 2003; Fazzari and Petersen, 1993) to R&D spending (Brown et al., 2009; Hall, 2002) many aspects of firm operations are affected by the availability of financial resources. Thus, the growth pattern of business companies is likely to depend on their ability to find affordable money to expand, or maintain, their current business. The relation between financial constraints (FC) and the growth dynamics of firms has been addressed in a series of recent works. While the theoretical literature is essentially unanimous in pointing at the hampering effect that FCs should exert on firm growth (see, for instance, Cooley and Quadrini, 2001; Clementi and Hopenhayn, 2006), empirical results are contrasting. On the one hand, Cabral and Mata (2003), measuring the availability of financial funds with age, find that the evolution of the firm size distribution is determined by firms ceasing to be financially constrained. The multivariate analysis proposed by Becchetti and Trovato (2002), and performed over a sample of small manufacturing firms, confirms the negative effects of credit rationing on growth. On the other hand, Fagiolo and Luzzi (2006), studying the reported cash flow of a large panel of firms, conclude that the lack of FC is not among the main determinants of firms' growth. Similar conclusions are drawn by Angelini and Generale (2008), who analyse instead a survey-based measure of access to credit.
