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Does Finance Bolster Superstar Companies? Banks, Venture Capital, and Firm Size in Local U.S. Markets

Author

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  • Popov, Alexander
Abstract
We study the relative effect of venture capital and bank finance on large manufacturing firms in local U.S. markets. Theory predicts that with venture capital, the firm size distribution should become more stretched-out to the right, but it’s ambiguous on the effect of banks on large firms. The empirical evidence suggests that while the average size of firms in the top bin of the firm size distribution has remained unaffected by banking sector developments, it has increased with venture capital investment. We argue that this is due to the emergence of new corporate giants rather than the growth of existing ones. JEL Classification: G24, J24, L11

Suggested Citation

  • Popov, Alexander, 2009. "Does Finance Bolster Superstar Companies? Banks, Venture Capital, and Firm Size in Local U.S. Markets," Working Paper Series 1121, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091121
    Note: 861282
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1121.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Max Berre, 2022. "Cross-Border Venture Capital Valuation: Business-Cycle, Institutional Factors, and Distance," Post-Print hal-03834620, HAL.
    2. Jean-Claude Trichet, 2010. "Luncheon address: central banking in uncertain times: conviction and responsibility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 243-266.
    3. Max Berre, 2022. "Which Factors Matter Most? Can Startup Valuation be Micro-Targeted?," Post-Print hal-03829877, HAL.
    4. Valerie Revest & Alessandro Sapio, 2016. "The creation function of a junior listing venue: An empirical test on the Alternative Investment Market," LEM Papers Series 2016/32, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Max Berre, 2022. "Which Factors Matter Most? Can Startup Valuation be Micro-Targeted?," Papers 2210.14518, arXiv.org.
    6. Valérie Revest & Alessandro Sapio, 2019. "Alternative equity markets and firm creation," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 1083-1118, July.

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    More about this item

    Keywords

    banking; firm size; venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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