Firm Heterogeneity and the Capital Market ∗ Tobias König Job

The estimation of the average responses for different subsets of the firm distribution sug- gest the existence of nonlinear effects and the relevance of financial constraints for the transmission of equity shocks. [...] Figure 2b splits the firm size bins along the following decades: the 1980s, the 1990s, the 2000s, and the 2010s. [...] The first half of the 1990s and the periods prior to the bursting of the dot-com bubble are characterized by large positive shocks to equity issuance, while the Asian financial crisis and the time pe- riods during the Great Recession represent large negative shocks. [...] 3.2.1 Relevance of the GIV In order to evaluate the relevance of the estimated GIV, I regress the aggregate growth rate of external equity on the GIV. [...] In order to investigate further the role of firm heterogeneity for the transmission of the shock, one has to look at the marginal effects of the financial constraints.