Project description
How informational frictions impact firm performance
Can finance and the relaxation of informational frictions for firms promote economic growth? What is the impact of frictions on corporate outcomes? The EU-funded grow project will answer these questions. It will use state-of-the-art methodology in finance and economics that allows inferring causality. Specifically, it will study a public policy programme of certification (rating) of firms that was introduced by a government agency in Portugal in 2008. The aim is to estimate the impact of informational and financial frictions on corporate performance. The project will investigate the channels through which the links between informational frictions, access to financing and corporate growth operate. It will also consider the externalities generated by firm certification on a broader network.
Objective
This project will provide new knowledge on the mechanisms through which finance, and the relaxation of informational frictions for firms can promote economic growth. A big challenge in the field of corporate finance is to establish causality, and cleanly identify the impact of frictions on corporate outcomes. I aim to transform the frontier of knowledge in my field by using state of the art methodology in finance and economics that allows inferring causality. I will exploit a public policy program of certification (rating) of firms that was introduced in Portugal in 2008 by a governmental agency as a laboratory to estimate the impact of informational and financial frictions on corporate performance. This program has unique features that permit a Multidimensional Regression Discontinuity Design to estimate the causal economic impact of firm certification, and access of firms to financing. I will investigate both in detail, and in a comprehensive approach the channels through which the links between informational frictions, access to financing and corporate growth operate. The richness of the data on Portuguese firms makes it possible to understand the role of productivity, investment, innovation, human capital (employment), and trade. Last, I will study externalities generated by firm certification on a broader network, which includes other firms in their supply chain but also financial institutions. This research has obvious and relevant policy implications for governments because it will measure the economic effects of relaxing financing constraints, and it will provide a better understanding of the channels through which financing and informational frictions operate to impact firm performance.
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Funding Scheme
ERC-STG - Starting GrantHost institution
SW7 2AZ LONDON
United Kingdom