Listing and Financial Constraints

Author Name UEDA Kenichi (University of Tokyo / TCER) / ISHIDE Akira (Northwestern University) / GOTO Yasuo (Faculty Fellow, RIETI)
Creation Date/NO. June 2017 17-E-090
Research Project Study on Corporate Finance and Firm Dynamics
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We confirm, with a twist, that listing on a stock exchange can mitigate the financial constraints of firms, using Japanese firm-level data over the period 1995-2014, controlling for main bank relationships and majority owner influence. Compared to a similar unlisted firm, a listed firm has a lower marginal product of capital and more new borrowings during recessions. Theoretically, we argue that these are the most important variables to uncover differential financial frictions between listed and unlisted firms. However, on average, listed firms do not borrow more over time, but rather maintain lower leverage to mitigate the borrowing constraints.