Business dynamism and financial constraints
Abstract
Abstract Declining business dynamism has been observed across many advanced economies; however, its consequences have been less well studied. In this paper, we propose that declining business dynamism has led to a decrease in the financial constraints faced by firms. We use well established methods to identify financial constraints and then develop a new approach to measure the fraction of financially constrained firms. We find that the fraction has fallen over time and this is driven by rising firm age. Had business dynamism not declined, firms would be younger and more financially constrained.
Fields of Study & Subjects
Corporate Finance and Governance
Firm Innovation and Growth
Working Capital and Financial Performance
Publication details
- Journal / source
- Canadian Journal of Economics/Revue canadienne d économique
- Volume
- 59
- Issue
- 1
- Pages
- 67–105
- Publication date
- 1 February 2026
- Language
- EN