The aim of this paper is to identify the effect of financing constraints on the employment decisions of firms. We present a theoretical model that determines the optimal use of fixed term and permanent contracts in the presence of financing constraints. We then estimate the effect of financing constraints on the dynamics of fixed-term employment contracts versus permanent employment contracts f...

This paper provides the first evidence on gender differences in investment financing, credit application and credit denial rates in Germany. The empirical analysis is carried out on a sample of firms drawn from the KfW Mittelstandspanel, a representative survey of German SMEs for the period from 2003 to 2009. Our results suggest that in female-owned firms the share of internal capital in invest...

Empirical studies document that resource reallocation across production units plays an important role in accounting for aggregate productivity growth in the U.S. manufacturing. Distortions in financial market could hinder the reallocation process and hence may adversely affect aggregate productivity growth. This paper studies the quantitative impact of costly external finance on aggregate produ...

We review and extend recent contingent claims models of capital structure. We focus on two models with analytic formulas in perpetual horizonLeland (1994) and Mauer and Sarkar (2004). We implement the investment option in both models in finite horizon with a numerical lattice while maintaining the analytic structure for the capital structure decisions in the second stage by maintaining the perp...

This paper provides a theory to analyze the consequences of financing constraints for firm characteristics such as investment, profitability, leverage, the fraction of external equity, the probability of default and the cost of capital. This theory is based on the effects of future investment opportunities and the legal protection of investors on entrepreneurs’ incentives to divert funds to the...