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Information Frictions, Financing and Growth: The Impact of Firm Certification

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.

Call for proposal

ERC-2019-STG
See other projects for this call

Funding Scheme

ERC-STG - Starting Grant

Host institution

IMPERIAL COLLEGE OF SCIENCE TECHNOLOGY AND MEDICINE
Address
South Kensington Campus Exhibition Road
SW7 2AZ London
United Kingdom
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 1 357 099

Beneficiaries (1)

IMPERIAL COLLEGE OF SCIENCE TECHNOLOGY AND MEDICINE
United Kingdom
EU contribution
€ 1 357 099
Address
South Kensington Campus Exhibition Road
SW7 2AZ London
Activity type
Higher or Secondary Education Establishments