How Important Are Financing Constraints? The Role of Finance in the Business Environment

What role does the business environment play in promoting or restraining firm growth? Recent literature points to a number of factors as obstacles to growth. Inefficient functioning of financial markets, inadequate security and enforcement of property rights, poor provision of infrastructure, ineffi...

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Main Authors:	Ayyagari, Meghana, Demirgüç-Kunt, Asli, Maksimovic, Vojislav
Format:	Journal Article
Published:	World Bank 2012
Subjects:	biases corruption economic development financial markets financial sector reforms financing obstacles government policies international bank obstacles to growth property rights
Online Access:	http://hdl.handle.net/10986/4489

id	okr-10986-4489
recordtype	oai_dc
spelling	okr-10986-44892021-04-23T14:02:18Z How Important Are Financing Constraints? The Role of Finance in the Business Environment Ayyagari, Meghana Demirgüç-Kunt, Asli Maksimovic, Vojislav biases corruption economic development financial markets financial sector reforms financing obstacles government policies international bank obstacles to growth property rights What role does the business environment play in promoting or restraining firm growth? Recent literature points to a number of factors as obstacles to growth. Inefficient functioning of financial markets, inadequate security and enforcement of property rights, poor provision of infrastructure, inefficient regulation and taxation, and broader governance features such as corruption and macroeconomic stability are all discussed without any comparative evidence on their ordering. Using firm-level survey data on the relative importance of different features of the business environment, the article finds that although firms report many obstacles to growth, not all the obstacles are equally constraining. Some affect firm growth only indirectly through their influence on other obstacles, or not at all. Analyses using directed acyclic graph methodology and regressions find that only obstacles related to finance, crime, and policy instability directly affect firm growth. The finance result is shown to be the most robust. The results have important implications for the priority of reforms. Maintaining policy stability, keeping crime under control, and undertaking financial sector reforms to relax financing constraints are likely to be the most effective routes to promote firm growth. 2012-03-30T07:12:37Z 2012-03-30T07:12:37Z 2008-12-01 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/4489 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank World Bank Journal Article Uzbekistan Singapore Uruguay Wallis and Futuna Islands
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	biases corruption economic development financial markets financial sector reforms financing obstacles government policies international bank obstacles to growth property rights
spellingShingle	biases corruption economic development financial markets financial sector reforms financing obstacles government policies international bank obstacles to growth property rights Ayyagari, Meghana Demirgüç-Kunt, Asli Maksimovic, Vojislav How Important Are Financing Constraints? The Role of Finance in the Business Environment
geographic_facet	Uzbekistan Singapore Uruguay Wallis and Futuna Islands
description	What role does the business environment play in promoting or restraining firm growth? Recent literature points to a number of factors as obstacles to growth. Inefficient functioning of financial markets, inadequate security and enforcement of property rights, poor provision of infrastructure, inefficient regulation and taxation, and broader governance features such as corruption and macroeconomic stability are all discussed without any comparative evidence on their ordering. Using firm-level survey data on the relative importance of different features of the business environment, the article finds that although firms report many obstacles to growth, not all the obstacles are equally constraining. Some affect firm growth only indirectly through their influence on other obstacles, or not at all. Analyses using directed acyclic graph methodology and regressions find that only obstacles related to finance, crime, and policy instability directly affect firm growth. The finance result is shown to be the most robust. The results have important implications for the priority of reforms. Maintaining policy stability, keeping crime under control, and undertaking financial sector reforms to relax financing constraints are likely to be the most effective routes to promote firm growth.
format	Journal Article
author	Ayyagari, Meghana Demirgüç-Kunt, Asli Maksimovic, Vojislav
author_facet	Ayyagari, Meghana Demirgüç-Kunt, Asli Maksimovic, Vojislav
author_sort	Ayyagari, Meghana
title	How Important Are Financing Constraints? The Role of Finance in the Business Environment
title_short	How Important Are Financing Constraints? The Role of Finance in the Business Environment
title_full	How Important Are Financing Constraints? The Role of Finance in the Business Environment
title_fullStr	How Important Are Financing Constraints? The Role of Finance in the Business Environment
title_full_unstemmed	How Important Are Financing Constraints? The Role of Finance in the Business Environment
title_sort	how important are financing constraints? the role of finance in the business environment
publisher	World Bank
publishDate	2012
url	http://hdl.handle.net/10986/4489
_version_	1764391585575862272

How Important Are Financing Constraints? The Role of Finance in the Business Environment

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