Abstract Financing Constraints and the Firm Size Distribution: Are Young Firms Constrained?


This work evaluates the existence of financial constraints over young firms for the period 2002-2007. Starting by evaluating the shape and evolution of the FSD across this period, the expected impact over the distribution is observed. To confirm if the observed patterns are effectively financing constraints over young firms, the approach conducted by Cabral & Mata (2003) is replicated for the same period of data. This procedure delivers successful results: financing constraints limit the size of the firm at an initial stage of firms ’ life. Furthermore, this conclusion is weighted over the possibility of different kind of factors driving financial constraints: a simple exercise comparing the hypothetical access to financial markets by young firms is conducted, leading to the conclusion that the financing constraints acting over firms for the period 2002-2007 are due to idiosyncratic characteristics of the firms. i

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