This paper examines the effects of financial development on firm growth via
the alleviation of financial constraints using data from 1,619 manufacturing
firms with more than 5 and less than 300 employees in South Korea between
2001 and 2013. This paper focuses on the heterogeneity effect of financial
development on firm growth based on information asymmetry as measured by
a firm’s size and age. The key findings are as follows: First, financial
development for SMEs had larger positive effects on the growth of large and
old firms than young and small ones. Firms with less than 30 employees
especially saw no benefits from financial development. Second, although
financial constraints became more severe after the financial crisis on average,
firms older than 20 years old with more than 100 employees were less
negatively affected than young and small ones. Third, an industry-level
analysis expanded from firm-level studies showed that the growth rate of
industries with high financial constraints was much lower than that of
industries with low financial constraints.