The Impact of the Business Environment on Young Firm Financing

A unique dataset of over 70,000 firms, most of which are small, in over 100 countries, is utilized to systematically study the use of different financing sources for new and young firms. Consistent age-related patterns emerge. Across all countries younger firms rely less on bank financing and more o...

Full description

Bibliographic Details
Main Authors:	Chavis, Larry W., Klapper, Leora F., Love, Inessa
Format:	Journal Article
Language:	en_US
Published:	World Bank 2013
Subjects:	Access to external finance bank financing earnings economic development Entrepreneur Entrepreneurial Finance entrepreneurs external finance financial development formal bank growth opportunities informal finance informal financing information asymmetry internal funds International Bank investment opportunities new business profitability small businesses
Online Access:	http://hdl.handle.net/10986/13489

id	okr-10986-13489
recordtype	oai_dc
spelling	okr-10986-134892021-04-23T14:03:08Z The Impact of the Business Environment on Young Firm Financing Chavis, Larry W. Klapper, Leora F. Love, Inessa Access to external finance bank financing earnings economic development Entrepreneur Entrepreneurial Finance entrepreneurs external finance financial development formal bank growth opportunities informal finance informal financing information asymmetry internal funds International Bank investment opportunities new business profitability small businesses A unique dataset of over 70,000 firms, most of which are small, in over 100 countries, is utilized to systematically study the use of different financing sources for new and young firms. Consistent age-related patterns emerge. Across all countries younger firms rely less on bank financing and more on informal financing. There is a clear substitution effect: as firms mature, more firms switch out of informal finance toward bank finance, while the total proportion of firms using external finance remains relatively unchanged. Importantly, these relationships hold for firms of different sizes, firms in different sectors, and firms located in countries with different income levels and on different continents. Thus, these patterns of young firm financing show clear universal tendencies. Given that even small firms increasingly use formal bank financing over time, these results suggest that information asymmetry plays an important role in decreasing a young firm's ability to obtain bank finance. 2013-05-21T15:59:25Z 2013-05-21T15:59:25Z 2011-10-18 Journal Article World Bank Economic Review 1564-698X doi:10.1093/wber/lhr045 http://hdl.handle.net/10986/13489 en_US World Bank Economic Review;25(3) CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank World Bank Journal Article Africa Caribbean East Asia North Africa South Asia Middle East Europe and Central Asia Eastern Europe Latin America
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	Access to external finance bank financing earnings economic development Entrepreneur Entrepreneurial Finance entrepreneurs external finance financial development formal bank growth opportunities informal finance informal financing information asymmetry internal funds International Bank investment opportunities new business profitability small businesses
spellingShingle	Access to external finance bank financing earnings economic development Entrepreneur Entrepreneurial Finance entrepreneurs external finance financial development formal bank growth opportunities informal finance informal financing information asymmetry internal funds International Bank investment opportunities new business profitability small businesses Chavis, Larry W. Klapper, Leora F. Love, Inessa The Impact of the Business Environment on Young Firm Financing
geographic_facet	Africa Caribbean East Asia North Africa South Asia Middle East Europe and Central Asia Eastern Europe Latin America
relation	World Bank Economic Review;25(3)
description	A unique dataset of over 70,000 firms, most of which are small, in over 100 countries, is utilized to systematically study the use of different financing sources for new and young firms. Consistent age-related patterns emerge. Across all countries younger firms rely less on bank financing and more on informal financing. There is a clear substitution effect: as firms mature, more firms switch out of informal finance toward bank finance, while the total proportion of firms using external finance remains relatively unchanged. Importantly, these relationships hold for firms of different sizes, firms in different sectors, and firms located in countries with different income levels and on different continents. Thus, these patterns of young firm financing show clear universal tendencies. Given that even small firms increasingly use formal bank financing over time, these results suggest that information asymmetry plays an important role in decreasing a young firm's ability to obtain bank finance.
format	Journal Article
author	Chavis, Larry W. Klapper, Leora F. Love, Inessa
author_facet	Chavis, Larry W. Klapper, Leora F. Love, Inessa
author_sort	Chavis, Larry W.
title	The Impact of the Business Environment on Young Firm Financing
title_short	The Impact of the Business Environment on Young Firm Financing
title_full	The Impact of the Business Environment on Young Firm Financing
title_fullStr	The Impact of the Business Environment on Young Firm Financing
title_full_unstemmed	The Impact of the Business Environment on Young Firm Financing
title_sort	impact of the business environment on young firm financing
publisher	World Bank
publishDate	2013
url	http://hdl.handle.net/10986/13489
_version_	1764423608083415040

The Impact of the Business Environment on Young Firm Financing

Similar Items