Financial Intermediation, Costly Information Production, and Small Industry Growth

Choi, Bongseok and Kim, Seon Tae ORCID: 0000-0002-8757-1476 (2020) Financial Intermediation, Costly Information Production, and Small Industry Growth. GLOBAL ECONOMIC REVIEW, 49 (1). pp. 60-96.

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Official URL: http://dx.doi.org/10.1080/1226508x.2019.1681287

Abstract

This paper studies the mechanism of financial intermediaries' information production and its impact on industry-level growth, especially its difference between industries that differ in the technological composition of small firms. We build a growth model in which (i) both loan contracts and production of information on borrowing firms' productivities are endogenously determined, and (ii) the smaller firm's productivity is more costly to assess. Analytic results show that the smaller firm's innately greater degree of informational opaqueness hinders its growth, especially in the early stage of a country's financial development. We provide some evidence supporting the key mechanism.

Item Type:	Article
Uncontrolled Keywords:	Economic growth, financial intermediation, capital allocation, firm size, financial development
Depositing User:	Symplectic Admin
Date Deposited:	09 Dec 2019 10:19
Last Modified:	19 Jan 2023 00:21
DOI:	10.1080/1226508X.2019.1681287
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3059106