Financial and Legal Institutions and Firm Size
The authors investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the bankin...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2181644/financial-legal-institutions-firm-size http://hdl.handle.net/10986/19157 |
| Summary: | The authors investigate how a
country's financial institutions and the quality of its
legal system explain the size attained by its largest
industrial firms in a sample of 44 countries. Firm size is
positively related to the size of the banking system and the
efficiency of the legal system. Thus, the authors find no
evidence that firms are larger in order to internalize the
functions of the banking system or to compensate for the
general inefficiency of the legal system. But they do find
evidence that externally financed firms are smaller in
countries that have strong creditor rights and efficient
legal systems. This suggests that firms in countries with
weak creditor protections are larger in order to internalize
the protection of capital investment. |
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