Financial market imperfections and profitability: New evidence from a large panel of US SME firms

This paper investigates the impact of financial market imperfections on small and medium-sized enterprise (SME) firms' profitability by using a unique panel data of US SME firms, spanning the period 1979-2017. The data set makes use of unique information on proxies of market imperfections pertaining to each firm in the sample. First, the findings document the statistical impact of those financial market imperfections on profitability. Moreover, the forecasting exercise illustrate the superiority of the model that explicitly includes those proxies.