The paper proposes a model where heterogeneous firms choose whether to undertake R&D or not. Depending on R&D choice, innovative firms are more productive, have larger investment opportunities and lower own funds than non-innovating firms. As a result, innovative firms are financially constrained while standard firms are not. The efficiency of the financial sector and a coun-try's institutional...

Credit booms often cause economic expansions. But some credit booms end in financial crises yet others do not. To find out why, this paper presents a dynamic general equilibrium model of production economies with adverse selection in the financial market. Entrepreneurs can take on short-term collateralized debt and trade long-term assets to finance investment. Funding liquidity can erode market...

Field Editor: P. Phan When and why one type of entrepreneur (franchisor) attracts to its ventures another type of entrepreneur (franchisees) instead of passive investors is a central concern in entrepreneurship literature. Based on the informativeness principle of the principal–agent model, we claim that franchisees are not such an expensive financial tool as has been argued in the literature b...

The financial crisis of 2007-2008 started with the collapse of the market for Collateralized Debt Obligations backed by sub-prime mortgages. In this paper we present a mechanism aimed at explaining how a freeze in a secondary debt market can be amplified and propagated to the real economy, and thereby cause a recession. Moreover, we show why such a process is likely to be especially strong afte...

Purpose Internationalisation is considered as a key strategy for the growth of Small and Medium Enterprises (SMEs). The purpose this paper to examine relationship between dynamic capability, SMEs internationalisation firm performance in context emerging economies evaluate impact financial, asset market expansion on SMEs. Design/methodology/approach Using primary data from 212 Bangladesh, struct...

Research on the usefulness of financial information generally focuses on the innovation in the information examined, such as an earnings surprise or cash flow growth. Consequently, prior research sheds little light on the role of the rich historical record of financial information in users’ decision-making. Using a sample of published restatements of earnings, we show that the revision of the h...

We study how social networks change as a result of an exogenous expansion in formal financial access and show how to estimate the effects of these changes on household outcomes. We use a unique household panel dataset that contains detailed information on the network of informal financial transactions before and after a field experiment that randomized access to savings accounts in Nepal. First...

Abstract This paper contributes to a fuller understanding of macroeconomic outcomes financial market disturbances and the central bank’s role in stability. Our two major contributions are conceptual econometric. Conceptually, we introduce phases business cycle econometrically employ Bayesian VARs. We document that shock increases credit non-financial sector leads persistent decline economic act...