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What Do We Know About Capital Structure? Some Evidence from International Data
We investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries. At an aggregate level, firm leverage is fairly
Financial Dependence and Growth
Does finance affect economic growth? A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per
The Benefits of Lending Relationships: Evidence from Small Business Data
This paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm. The authors analyze data collected in a survey of small firms by the
Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt
While the benefits of bank financing are relatively well understood, the costs are not. This paper argues that while informed banks make flexible financial decisions which prevent a firm's projects
The Effect of Credit Market Competition on Lending Relationships
This paper provides a simple model showing that the extent of competition in credit markets is important in determining the value of lending relationships. Creditors are more likely to finance credit
Trade Credit: Theories and Evidence
In addition to borrowing from financial institutions, firms may be financed by their suppliers. Although there are many theories explaining why non-financial firms lend money, there are few
The Great Reversals: The Politics of Financial Development in the 20th Century
Indicators of the development of the financial sector do not improve monotonically over time. In particular, we find that by most measures, countries were more financially developed in 1913 than in
The Cost of Diversity: The Diversification Discount and Inefficient Investment
In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater
Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking
Loans are illiquid when a lender needs relationship‐specific skills to collect them. Consequently, if the relationship lender needs funds before the loan matures, she may demand to liquidate early,
Does Distance Still Matter? The Information Revolution in Small Business Lending
The distance between small firms and their lenders in the United States is increasing. Not only are firms choosing more distant lenders, they are also communicating with them in more impersonal ways.
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