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Financial Fragility and Growth Dynamics of Italian Business Firms

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  • Giulio Bottazzi
  • Angelo Secchi
  • Federico Tamagni

Abstract

This work explores a number of properties investigated in the empirical literature on firm size and growth dynamics: (i) the distribution and the autoregressive structure of firm size; (ii) the existence of size-growth scaling relationships; (iii) the distribution and the autoregressive structure of scaling-free growth rates. The major novelty concerns our exploiting of a credit rating index to condition all the analyses upon firms' financial fragility and access to credit. We find that the distributions of both firm size and firm growth rates are fatter tailed among less solvable firms than in the rest of the sample, both at the bottom and at the top extreme of the distributions. As a result, we conclude that not only small and/or slowly growing firms might suffer from difficulties in raising external financing, but also big and fast growing ones might be exposed to financial constraints.

Suggested Citation

  • Giulio Bottazzi & Angelo Secchi & Federico Tamagni, 2006. "Financial Fragility and Growth Dynamics of Italian Business Firms," LEM Papers Series 2006/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2006/07
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    More about this item

    Keywords

    Firm size; Firm growth; Financial constraints;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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