Institutional Affiliation: Federal Reserve Bank of Atlanta
with Ufuk Akcigit, Emin Dinlersoz, Jeremy Greenwood: w26196
Venture capital (VC) and growth are examined both empirically and theoretically. Empirically, VC-backed startups have higher early growth rates and initial patent quality than non-VC-backed ones. VC-backing increases a startup’s likelihood of reaching the right tails of the firm size and innovation distributions. Furthermore, outcomes are better for startups matched with more experienced venture capitalists. An endogenous growth model, where venture capitalists provide both expertise and financing for business startups, is constructed to match these facts. The presence of venture capital, the degree of assortative matching between startups and financiers, and the taxation of VC-backed startups matter significantly for growth.
|Leverage over the Life Cycle and Implications for Firm Growth and Shock Responsiveness|
with Emin Dinlersoz, Sebnem Kalemli-Ozcan, Henry Hyatt: w25226
We study the leverage of U.S. firms over their life-cycles, and the connection between firm leverage, firm growth, and aggregate shocks. We construct a new dataset that combines private and public firms’ balance sheets with firm-level data from U.S. Census Bureau’s Longitudinal Business Database (LBD) for the period 2005–2012. Public and private firms exhibit different leverage dynamics over their life-cycles. Firm age and size are systematically related to leverage for private firms, but not for public firms. We show that private firms, but not public ones, deleveraged during the Great Recession, and that this deleveraging is associated with a reduction in firm revenue and employment growth. Exploiting sectoral variation, we find that the leverage dynamics of firms is also relevant for ag...