Financial and Legal Constraints to Firm Growth : Does Size Matter?

Financial and Legal Constraints to Firm Growth : Does Size Matter?

Using a unique firm-level survey data base, covering fifty four countries, the authors investigate whether different financial, legal, and corruption issues that firms report as constraints, actually affect their growth rates. The results show that...

Full description

Bibliographic Details
Main Authors: Beck, Thorsten, Demirguc-Kunt, Asli, Maksimovic, Vojislav
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2013
Subjects:
FINANCIAL NEEDS
FINANCIAL REPRESSION
LEGAL FRAMEWORK
FIRM SIZE
GROWTH PROJECTIONS
SURVEY DATA
CORRUPTION
POLICY PLANNING
SMALL & MEDIUM SCALE ENTERPRISES
PERFORMANCE INDICATORS
INSTITUTIONAL FRAMEWORK
FINANCIAL INSTITUTIONS
MONITORING CRITERIA
INFORMATION COLLECTION ACCESS TO INFORMATION
BANKING SYSTEM
BUREAUCRACY
BUSINESS ENVIRONMENT
COMPETITORS
CORPORATE FINANCE
CORRUPTION ISSUES
CORRUPTION PROBLEMS
COUNTRIES FIRMS
COUNTRY CHARACTERISTICS
COURT SYSTEM
COVENANTS
CRIME
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
EMPLOYMENT
FINANCIAL CONSTRAINTS
FINANCIAL DEVELOPMENT
FINANCIAL INFORMATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FINANCIAL SYSTEM
FINANCIAL SYSTEMS
FINANCING CONSTRAINTS
FOREIGN BANKS
FOREIGN ENTITIES
GOVERNMENT OFFICIALS
GROWTH RATE
GROWTH RATES
INTERNATIONAL DEVELOPMENT
JUDICIARY
LAWS
LEASING
LEGAL DEVELOPMENT
LEGAL INSTITUTIONS
LEGAL ORIGINS
LEGAL SYSTEM
LEGAL SYSTEMS
LOCAL AUTHORITIES
LOCAL INSTITUTIONS
MEDIUM ENTERPRISES
NATIONAL LEVEL
PER CAPITA INCOMES
POLICY IMPLICATIONS
PROPERTY RIGHTS
RULE OF LAW
SMALL FIRMS
SOFT BUDGET CONSTRAINTS
UNOFFICIAL ECONOMY
VIOLATIONS
Online Access:http://documents.worldbank.org/curated/en/2002/02/1715978/financial-legal-constraints-firm-growth-size-matter
http://hdl.handle.net/10986/15616
Description
Summary:Using a unique firm-level survey data base, covering fifty four countries, the authors investigate whether different financial, legal, and corruption issues that firms report as constraints, actually affect their growth rates. The results show that the extent to which these factors constrain a firm's growth depends very much on its size, and that it is consistently the smallest firms that are most adversely affected by all these constraints. Firm growth is more affected by reported constraints in countries with underdeveloped financial, and legal systems, and higher corruption. So, policy measures to improve financial, and legal development, and reduce corruption are well justified in promoting firm growth, particularly the development of the small, and medium enterprise sector. But the evidence also shows that the intuitive descriptors of an "efficient" legal system, are not correlated with the components of the general legal constraints that predict firm growth. This finding suggests that the mechanism by which the legal system affects firm performance, is not well understood. The authors' findings also provide evidence that the corruption of bank officials, constraints firm growth. This "institutional failure" should be taken into account, when modeling the monitoring role of financial institutions in overcoming market failures due to informational asymmetries.

Similar Items