Financing Corporate Growth

Murray Z. Frank, Ali Sanati

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


Considerable research tackles the aggregate impact of debt financing. We show that equity is more important for firm growth than generally understood. A dollar of equity issuance is associated with an extra $\$0.93$ of real assets, whereas a dollar of debt issuance is associated with an extra $\$0.14$. Firms issue equity first, then increase real assets, and, finally, issue debt while repurchasing equity. We explain this sequence using a model in which debt is tax preferred relative to equity but is subject to limited commitment. We use the estimated model to evaluate how several government policies affect corporate growth.

Original languageEnglish (US)
Pages (from-to)4926-4998
Number of pages73
JournalReview of Financial Studies
Issue number10
StatePublished - Oct 1 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2020 The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please e-mail:


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