Abstract
We confirm, with a twist, that listing to a stock exchange can mitigate financial constraints of firms, using Japanese firm-level data of 20 years, 1995–2014, controlling for the main-bank relationship and majority owner influence. Compared to a similar unlisted firm, a listed firm has a lower marginal product of capital on average and more new borrowings during recessions. Theoretically, we argue that these are the key pieces of evidence that indicate less tight financial constraints for the listed firms than the unlisted firms. However, the listed firms do not borrow more on average over time. They rather maintain a lower leverage so that they can mitigate the borrowing constraints. We also find that the listed firms do not face lower interest rates.
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