Anatomy of the Greek Depression with Firm-Level Data: The Importance of Demand Shocks

Employment declined substantially during the 2007–2009 recession, especially in small and young firms. Using confidential firm-level data of the universe of firms and a difference-in-differences methodology, this paper estimates that financial constraints reduced employment growth by 4 to 8 percentage points in small firms relative to large firms and by 7 to 9 percentage points in young relative to old firms. I find that the effect of financial constraints on small firms is driven to a large extent by young firms. I then document that financial constraints affected employment growth in small and young firms strongly through the entry and exit of firms.

Oil demand shocks reconsidered: A cointegrated vector autoregression

The provision of long-term credit and firm growth in developing countries

PurposeDo financial services needs depend on the firm size? To highlight the impact of different categories of financial services on firm performance, we establish a correspondence between financial services and firms' performance classified according to their size, controlling with the determinants of firm performance and the obstacles that hinder the development of each category of firm.Design/methodology/approachWe have mobilized microeconomic data on 78,629 firms stratified by size and covering 135 countries, extracted from the Enterprise Surveys database. A two-stage least squares (2SLS) regression analysis with instrumental variable modeling is used.FindingsOur empirical results show that a firm's financing behavior differs according to its size. For micro and small firms, the availability of internal financing has a positive impact on their performance. For medium-size firms, the use of debt stimulates firm performance. For large firms, the positive effect of debt diminishes as the level of debt increases, which leads this category of firms to increase their capital. We complemented our study by exploring the issue of whether barriers to firm performance differ by size. Our results bring a support to the idea that medium-size firms suffer more than micro, small, and large firms. The size of this category of firms does not allow them to operate in the informal sector as micro and small firms do, and does not allow them to influence political authorities to operate in their favor as large firms do.Originality/valuePrevious studies have focused on investigating the effects of access to finance and/or financing constraints on firm's performance, neglecting the issue of identifying which financial services have the most impact on firm performance depending on firms' size. This study fills the gap in the literature in two main ways. First, we identify the financial services that have the most impact on firm performance using firm-level data covering 78,629 firms by size (micro, small, medium, and large). Second, we investigate the different barriers to firm performance by size.

An Incentive Contract as Merger Conduct Remedy

This study investigates the effects of firms’ financial constraints on their productivity by considering firms’ ownership structure and characteristics using a manufacturing firm-level dataset from South Korea for the period 2006–2017. The System Generalized Method of Moments results indicate that foreign multinational corporations rarely experienced financial constraints on their productivity, whereas the effects of financial constraints on productivity were aggravated for domestic firms during the global financial crisis. Particularly, small, young, and unaffiliated domestic firms experienced more severe financial constraints, especially during the global financial crisis, than did large, old, and affiliated domestic firms. The results show that small, young, and unaffiliated domestic firms which invested in R&D activity were less financially constrained than those without R&D activity. Based on the Heckman two-step estimation results, financial factors significantly affected R&D investment; thus, severe financial constraints hindered optimal R&D investment, which is necessary for productivity enhancement. Therefore, financial market failure during the global financial crisis resulted in productivity polarization. Hence, policies that relax financial constraints for innovation activity, such as R&D subsidies and tax exemption incentives should be targeted to financially vulnerable firms, such as small, young, and unaffiliated domestic firms. These policies should be strengthened during a financial crisis.

This paper investigates the contribution of small firms to employment, job creation, and growth in developing countries. While small firms (< 20 employees) have the smallest share of aggregate employment, the SME sector's (<100 employees) contribution is comparable to that of large firms. Small firms have the largest shares of job creation, and highest sales growth and employment growth, even after controlling for firm age. Large firms, however, have higher productivity growth. Conditional on size, young firms are the fastest growing and large mature firms have the largest employment shares but small young firms have higher job creation rates.

The effect of the Great Recession on the employment growth of young vs. small firms in the Eurozone

Business spending on research and development (R&amp;D) is generally recognized as a private activity providing broader economic benefits that justify government support. But subsidizing R&amp;D has costs as well as benefits, and governments need to exercise judgement to ensure that subsidies are set at a level that results in a net economic benefit for society as a whole, not just for the recipients of the assistance. A key finding of the international comparison undertaken in this paper is that Canada and nine other of the 36 countries in the comparison group are providing R&amp;D subsidies that are likely too high to generate a net economic benefit. Subsidy rates in this group of countries range from 25 to 45 per cent. The risk of excessive subsidization is confined to small firms in Canada, which receive a subsidy of almost 41 per cent through the tax system. Canada’s subsidy rate for small firms is the third highest, behind Chile and France. Other countries providing subsidy rates close to 40 per cent are Spain and India. This paper also assesses several design features of tax assistance measures, including enhanced benefits for small and young firms, refundability of benefits and incentives based on increases in R&amp;D spending above a base level. While the best policy for R&amp;D subsidies may be a uniform rate for all businesses regardless of age or size, the case for favouring young firms is somewhat stronger than for favouring all small firms. Focusing on young firms avoids providing benefits to small firms that are not growth-oriented; but, it is difficult to design a program that can be completely restricted to young firms since entrepreneurs would have an incentive to create new firms to avoid losing higher benefits. Even with this “leakage”, however, an age-dependent incentive could be more cost-effective than size-dependent enhanced benefits. There is a particularly strong case for providing refundability to young firms, which are unlikely to have taxable income while the first round of R&amp;D is undertaken While refundability for large firms has the advantage of increasing the effective subsidy rate on R&amp;D to its target level, it runs the risk of revenue losses as multinational firms have less incentive to ‘book’ taxable income in Canada. A reasonable compromise would be to adjust the value of unused credits and deductions to maintain their present value. International comparisons of tax assistance for R&amp;D typically highlight country rankings and express satisfaction with the most generous regimes. This paper draws attention to the possibility of providing too much of a good thing, a warning that governments in Canada should keep in mind when preparing next year’s budgets.

The popular emergence of the concepts ‘Born Global’ and ‘International New Ventures’ can be traced back to business and consulting reports in the late 1980s and early 1990s. In the decade of the 1980s, the richness, diversity and appeal of international markets to smaller and younger firms became apparent and the report of their efforts appeared in the popular business press. For example, the business press featured articles on smaller American firms surging ahead in international markets or small firms and big exports in the early 1990s (Loane 2005). A consulting study for the Australian Manufacturing Council (McKinsey & Co. 1993) pointed to a pattern of systemic international activities of a large number of smaller Australian exporters and Rennie (1993) reported on a large number of smaller Australian firms that had engaged in substantive exporting in the early stages of their lifespan and called them ‘Born Globals’, which is viewed as a conceptual milestone. In an editorial piece, Cavusgil (1994) referred to the ‘Born Global’ phenomenon as a ‘quiet revolution’ in scholarly international business. The early contributions of Oviatt and McDougall (1994), Knight and Cavusgil (1996) and Knight (1997) introduced and examined some aspects of the emerging phenomenon of smaller firms’ internationalization. These early reports indicated that smaller firms had been expanding abroad rather than growing in the home market in the early stages of their lifespan; although they did not report on the distribution of age, size and speed or scope of these firms’ internationalization. Early internationalization by smaller and younger firms was already a substantive conceptual and also a practical deviation from the state of received theory of international business at the time, at least in the following aspects:

Purpose Amid conflicting narratives on how mismanagement or corruption shapes corporate performance, this study examines the uneven ripple effects of managerial misconduct, exploring how its impact varies across firms of different sizes and ages and how these characteristics amplify or mitigate its consequences. Drawing on agency theory, it hypothesizes that corruption increases agency costs, thereby reducing performance, particularly in younger and smaller firms with limited resources. Design/methodology/approach This study employs a multi-country cross-sectional dataset comprising 3,151 nonfinancial companies from 31 European countries, combining financial data with information on managerial mismanagement. To address potential endogeneity, it applies a two-stage least squares (2SLS) approach using instrumental variables. Findings Findings indicate that managerial corruption negatively affects firm performance, particularly in smaller and younger firms. The most notable result is the moderating role of financial constraints, proxied by firm size and age, in the relationship between corruption and performance. Larger and older firms tend to experience a less adverse impact, possibly due to economies of scale in managing corruption or the presence of more robust internal controls. Furthermore, the effects of corruption vary across industries. Robustness tests confirm these results. Research limitations/implications The main limitation of this study is its reliance on a cross-sectional dataset. Practical implications This study highlights the need for tailored anti-corruption strategies, particularly in smaller and younger firms where the negative impact of corruption is strongest, suggesting that managers and policymakers should implement robust governance measures. Social implications Corruption within companies not only reduces profitability but also erodes trust among stakeholders, from employees to the public, ultimately affecting communities and societies at large. Therefore, detailed and transparent disclosure of anti-corruption efforts is essential to rebuild trust and demonstrate a commitment to integrity. Originality/value This study is original in its firm-level approach to measuring the impact of corruption on performance, using a novel metric based on the percentage of managers facing sanctions, enforcement actions or adverse media coverage. It is also among the first to empirically examine how firm size and age moderate the effects of corruption on performance.

This study evaluates the impact of the provision of long-term credit (LTC) on the growth of small and young firms in developing countries. The growth of firms is evaluated on the basis of employment growth and total sales. Credit provisions have also been collected from the short- and LTC extended to the private sector. This study uses data on firm levels from more than 19000 firms in 52 countries between 2006–2016. In order to avoid the endogeneity issues that usually occur in such studies, this study has implemented a cross-country model to evaluate the significance of total bank credit, both long- and short-term, on the growth of sales and employment. The econometric results indicate that the availability of short-term credit (STC) is more beneficial for the growth of the firms, i.e. STC was found to have a significant impact on employment growth and sales in small and young firms. Although positive, LTC seemed to have no significance in the growth of the small and young firms. This study suggests that the prime reason behind these results is the availability of long-term loans for small and young firms.

Using a large unbalanced panel data set of Portuguese manufacturing firms surviving over the period from 1990 to 2001, the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth. We use a GMM-system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth. The model is estimated for all size classes, including micro firms. Our findings reveal that smaller and younger firms have higher growth-cash flow sensitivities than larger and more mature firms. This is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms. Nevertheless, the same finding can be interpreted in a different way if we consider the more recent literature which interpret the higher investment/cash flow sensitivity of younger and smaller firm in absence of financial market imperfection as the outcome of these firms reaction to the fact that realisation of their cash flows reveals them the direction to go in presence of uncertainty of their growth prospect. Besides, firms that were small and young at the beginning of the sample period exhibited more persistent growth than those that were large and old. Finally, these results have significant policy implications.

Small firms often follow the financial behavior of large firms to sustain operations and mitigate risks during periods of uncertainty. This study examines the relationship between corporate cash holdings of small and large firms, while assessing the impact of corporate governance and financial constraints among 200 non-financial companies listed on the Pakistan Stock Exchange (PSX) from 2013 to 2018. Financial constraints (FC) are measured using the Altman Z-score, and corporate governance (CG) is evaluated through Board Size, Board Independence, Board Meetings, Institutional Shareholding, and Executive Shareholding. The control variables include Non-Cash Assets, Operating Cash Flow, Capital Expenditure, Net Working Capital, Sales Growth, Leverage, and Firm Size, while Cash Holdings serve as the dependent variable. Using a deductive and quantitative approach with panel data analysis (Fixed Effect Model) in EViews 9, the study finds that small and large firms exhibit a positive and significant correlation in cash-holding behavior. Financial constraints show a significant positive relationship with cash holdings, indicating that constrained firms retain more liquidity as a precautionary measure. Among corporate governance proxies, only Executive Shareholding significantly influences cash holdings, while others are insignificant. Furthermore, all control variables, except Capital Expenditure, significantly affect firms’ cash-holding levels. These findings contribute to understanding the cash management behavior of firms in emerging markets, emphasizing the combined role of governance mechanisms and financial constraints in shaping corporate liquidity decisions.

The main objective of the present thesis is to examine and evaluate the impact of various factors on the growth patterns of firms. In doing so, we make use of a dataset on firms that operate in the Greek sectors of manufacturing and services during the period 1995-2001. Intra-industry growth dynamics of firms are analyzed in the context of the stochastic theory of growth, which is expressed mainly by Gibrat’s Law. In this framework, initial firm size is considered as a critical variable for the investigation of the behaviour of firm growth. At the same time, the present thesis investigates whether relevant factors - such as firm size, firm age, persistence of firm growth, financing constraints, Information and Communication Technologies (ICT) - play any role in the growth process of firms. The thesis consists of 6 chapters. The first chapter provides a short introduction in the subject of thesis. Chapter 2 provides an extensive empirical and theoretical literature review on firm growth. Chapter 3 investigates the dynamic growth process of firms in the context of Gibrat’s Law and considers the potential persistence of firm growth over time, using a dataset of 3685 firms that operate in the Greek manufacturing sector. In this empirical chapter, applying the OLS and the delta method, the results suggest for the total sample that small surviving firms have a higher potential of growth than larger ones. The classification of firms in 4 size groups and 4 age groups yields interesting findings. In particular, it is observed that the growth rates of micro, small and young firms tend to persist in subsequent periods. On the other hand, the growth patterns of medium, large and old firms follow a random walk. Chapter 4 examines the growth patterns of 4975 firms that act in the Greek service sector, focusing particularly on the role of ICT. This empirical analysis uses the GMM system technique to estimate separately each of the 14 available disaggregated service industries. The results show that the firm growth patterns are heterogeneous for different ICT groups of industries and the dynamic growth process of firms in ICT-related services might not resemble the firm growth patterns holding in manufacturing. Chapter 5 examines the impact of financing constraints on the growth of 1734 firms that operate in the Greek manufacturing sector. At the same time, this empirical analysis investigates possible factors that affect the ability of firms to have access to external finance, using the GMM system method in order to estimate the examined growth models. By classifying firms in 3 age groups and in 2 major groups of industries with respect to their intensity in the use of ICT, it is found that young firms face greater financing constraints than their older counterparts. On the contrary, in ICT sectors young firms appear to be able to acquire similar access to external finance as the older firms. The last chapter, summarizes the main findings of the three empirical chapters, points at relevant policy implications, limitations and directions for further research.