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...

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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

id	okr-10986-15616
recordtype	oai_dc
spelling	okr-10986-156162021-04-23T14:03:19Z Financial and Legal Constraints to Firm Growth : Does Size Matter? Beck, Thorsten Demirguc-Kunt, Asli Maksimovic, Vojislav 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 CORRUPTION ISSUES CORRUPTION PROBLEMS COUNTRIES FIRMS COUNTRY CHARACTERISTICS COURT SYSTEM COVENANTS CRIME ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPLOYMENT FINANCIAL CONSTRAINTS FINANCIAL DEVELOPMENT FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING CONSTRAINTS FIRM SIZE 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 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. 2013-09-04T19:57:35Z 2013-09-04T19:57:35Z 2002-02 http://documents.worldbank.org/curated/en/2002/02/1715978/financial-legal-constraints-firm-growth-size-matter http://hdl.handle.net/10986/15616 English en_US Policy Research Working Paper;No. 2784 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	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 CORRUPTION ISSUES CORRUPTION PROBLEMS COUNTRIES FIRMS COUNTRY CHARACTERISTICS COURT SYSTEM COVENANTS CRIME ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPLOYMENT FINANCIAL CONSTRAINTS FINANCIAL DEVELOPMENT FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING CONSTRAINTS FIRM SIZE 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
spellingShingle	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 CORRUPTION ISSUES CORRUPTION PROBLEMS COUNTRIES FIRMS COUNTRY CHARACTERISTICS COURT SYSTEM COVENANTS CRIME ECONOMIC DEVELOPMENT ECONOMIC GROWTH EMPLOYMENT FINANCIAL CONSTRAINTS FINANCIAL DEVELOPMENT FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCING CONSTRAINTS FIRM SIZE 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 Beck, Thorsten Demirguc-Kunt, Asli Maksimovic, Vojislav Financial and Legal Constraints to Firm Growth : Does Size Matter?
relation	Policy Research Working Paper;No. 2784
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Beck, Thorsten Demirguc-Kunt, Asli Maksimovic, Vojislav
author_facet	Beck, Thorsten Demirguc-Kunt, Asli Maksimovic, Vojislav
author_sort	Beck, Thorsten
title	Financial and Legal Constraints to Firm Growth : Does Size Matter?
title_short	Financial and Legal Constraints to Firm Growth : Does Size Matter?
title_full	Financial and Legal Constraints to Firm Growth : Does Size Matter?
title_fullStr	Financial and Legal Constraints to Firm Growth : Does Size Matter?
title_full_unstemmed	Financial and Legal Constraints to Firm Growth : Does Size Matter?
title_sort	financial and legal constraints to firm growth : does size matter?
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2002/02/1715978/financial-legal-constraints-firm-growth-size-matter http://hdl.handle.net/10986/15616
_version_	1764429717202534400

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

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