Does Local Financial Development Matter for Firm Lifecycle in India?

The differences in financial development across Indian states, while seeming substantial, have a minor effect on firm lifecycle and growth. These results hold controlling for differences in labor regulations across states, capital intensity, and fo...

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Main Authors:	Ayyagari, Meghana, Demirguc-Kunt, Asli, Maksimovic, Vojislav
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	ACCESS TO BANKING ACCESS TO BANKING SERVICES ACCOUNTING AGE GROUP AGE GROUPS BANK BRANCH BANK BRANCHES BANK CREDIT BANK FINANCING BANKING REFORM BANKING REGULATION BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKING SYSTEMS BANKS BRANCH BRANCHES BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS CAPITAL EXPENDITURES CAPITAL MARKET CASH FLOW CHAMBERS OF COMMERCE COMMERCIAL BANK COMMERCIAL BANKS COMPANY CORPORATE ACQUISITIONS CORPORATE FINANCE CORPORATE GOVERNANCE CORPORATIONS CORRUPTION CREDIT ALLOCATION DEBT DEPOSIT DEPOSIT INSURANCE DEPOSITS DEVELOPMENT ECONOMICS DIVERSIFICATION DIVIDEND POLICY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC REFORMS ECONOMIC SUCCESS ECONOMICS EDUCATION LEVEL EMPLOYEE EMPLOYER EMPLOYMENT EMPLOYMENT DYNAMICS EMPLOYMENT LEVELS EMPLOYMENT PROTECTION LEGISLATION ENTREPRENEURIAL ACTIVITY ENTREPRENEURSHIP EXPANSION EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL OUTREACH FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR REFORMS FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FIRM GROWTH FIRM PERFORMANCE FIRM SIZE FIRM SIZE DISTRIBUTION FIRMS FLEXIBLE LABOR MARKETS FOREIGN BANKS FORMAL FINANCIAL INSTITUTION GROWTH OPPORTUNITIES INCOME INDUSTRY CHARACTERISTICS INEQUALITY INFLEXIBLE LABOR INFORMAL FINANCE INFORMAL SECTOR INTERNATIONAL BANK JOB CREATION LABOR FORCE LABOR INTENSITY LABOR LAWS LABOR MARKET INSTITUTIONS LABOR MARKET OUTCOMES LABOR MARKET REGULATION LABOR MARKET REGULATIONS LABOR MARKETS LABOR PRODUCTIVITY LABOR REGULATION LABOR REGULATIONS LABOUR LABOUR MARKET LABOUR MARKET REGULATION LAWS LEGISLATION LENDING DECISIONS LICENSING LINES OF CREDIT MACROECONOMICS MANUFACTURING INDUSTRIES MARKET LIBERALIZATION MERCHANTS MIGRATION MULTIPLIER EFFECT NATIONALIZED BANKS NEW BUSINESSES OUTPUTS PLANT SIZE PRIVATE BANKS PRIVATE CREDIT PRIVATE EQUITY PRIVATE SECTOR PRIVATE SECTOR BANKS PRODUCT MARKETS PRODUCTION PROCESS PRODUCTIVITY PROFITABILITY REGIONAL RURAL BANKS RESERVE BANK OF INDIA RIGID LABOR MARKET SIZE OF FIRMS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL ENTERPRISES SMALL FIRM SMALL FIRMS SOCIAL BANKING SOCIAL CAPITAL STATE OWNED BANKS STOCK MARKETS TRADE REFORMS TRANSPORT UNEMPLOYMENT UNION UNPAID FAMILY WORKERS URBAN AREAS VILLAGES WAGES WATER SUPPLY WORKER WORKERS
Online Access:	http://documents.worldbank.org/curated/en/2014/08/20132223/local-financial-development-matter-firm-lifecycle-india http://hdl.handle.net/10986/20349

id	okr-10986-20349
recordtype	oai_dc
spelling	okr-10986-203492021-04-23T14:03:55Z Does Local Financial Development Matter for Firm Lifecycle in India? Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav ACCESS TO BANKING ACCESS TO BANKING SERVICES ACCOUNTING AGE GROUP AGE GROUPS BANK BRANCH BANK BRANCHES BANK CREDIT BANK FINANCING BANKING REFORM BANKING REGULATION BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKING SYSTEMS BANKS BRANCH BRANCHES BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS CAPITAL EXPENDITURES CAPITAL MARKET CASH FLOW CHAMBERS OF COMMERCE COMMERCIAL BANK COMMERCIAL BANKS COMPANY CORPORATE ACQUISITIONS CORPORATE FINANCE CORPORATE GOVERNANCE CORPORATIONS CORRUPTION CREDIT ALLOCATION DEBT DEPOSIT DEPOSIT INSURANCE DEPOSITS DEVELOPMENT ECONOMICS DIVERSIFICATION DIVIDEND POLICY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC REFORMS ECONOMIC SUCCESS ECONOMICS EDUCATION LEVEL EMPLOYEE EMPLOYER EMPLOYMENT EMPLOYMENT DYNAMICS EMPLOYMENT LEVELS EMPLOYMENT PROTECTION LEGISLATION ENTREPRENEURIAL ACTIVITY ENTREPRENEURSHIP EXPANSION EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL OUTREACH FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR REFORMS FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FIRM GROWTH FIRM PERFORMANCE FIRM SIZE FIRM SIZE DISTRIBUTION FIRMS FLEXIBLE LABOR MARKETS FOREIGN BANKS FORMAL FINANCIAL INSTITUTION GROWTH OPPORTUNITIES INCOME INDUSTRY CHARACTERISTICS INEQUALITY INFLEXIBLE LABOR INFORMAL FINANCE INFORMAL SECTOR INTERNATIONAL BANK JOB CREATION LABOR FORCE LABOR INTENSITY LABOR LAWS LABOR MARKET INSTITUTIONS LABOR MARKET OUTCOMES LABOR MARKET REGULATION LABOR MARKET REGULATIONS LABOR MARKETS LABOR PRODUCTIVITY LABOR REGULATION LABOR REGULATIONS LABOUR LABOUR MARKET LABOUR MARKET REGULATION LAWS LEGISLATION LENDING DECISIONS LICENSING LINES OF CREDIT MACROECONOMICS MANUFACTURING INDUSTRIES MARKET LIBERALIZATION MERCHANTS MIGRATION MULTIPLIER EFFECT NATIONALIZED BANKS NEW BUSINESSES OUTPUTS PLANT SIZE PRIVATE BANKS PRIVATE CREDIT PRIVATE EQUITY PRIVATE SECTOR PRIVATE SECTOR BANKS PRODUCT MARKETS PRODUCTION PROCESS PRODUCTIVITY PROFITABILITY REGIONAL RURAL BANKS RESERVE BANK OF INDIA RIGID LABOR MARKET SIZE OF FIRMS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL ENTERPRISES SMALL FIRM SMALL FIRMS SOCIAL BANKING SOCIAL CAPITAL STATE OWNED BANKS STOCK MARKETS TRADE REFORMS TRANSPORT UNEMPLOYMENT UNION UNPAID FAMILY WORKERS URBAN AREAS VILLAGES WAGES WATER SUPPLY WORKER WORKERS The differences in financial development across Indian states, while seeming substantial, have a minor effect on firm lifecycle and growth. These results hold controlling for differences in labor regulations across states, capital intensity, and for firms born before and after the major reforms. There is no evidence that firms in financially dependent industries have different lifecycle profiles or grow faster in financially developed states than underdeveloped states. Overall, firms in the formal manufacturing sector grow as they age whereas in the informal sector, firms have a declining lifecycle, but in both cases little evidence is found that financial institutions matter for firm lifecycle. The findings of this paper suggest that size and depth differences in financial development across Indian states are likely dwarfed by overall inefficiencies that characterize state-dominated financial systems, with important implications for the reforms of the Indian financial system going forward. 2014-10-02T21:09:28Z 2014-10-02T21:09:28Z 2014-08 http://documents.worldbank.org/curated/en/2014/08/20132223/local-financial-development-matter-firm-lifecycle-india http://hdl.handle.net/10986/20349 English en_US Policy Research Working Paper;No. 7008 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research South Asia India
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	ACCESS TO BANKING ACCESS TO BANKING SERVICES ACCOUNTING AGE GROUP AGE GROUPS BANK BRANCH BANK BRANCHES BANK CREDIT BANK FINANCING BANKING REFORM BANKING REGULATION BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKING SYSTEMS BANKS BRANCH BRANCHES BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS CAPITAL EXPENDITURES CAPITAL MARKET CASH FLOW CHAMBERS OF COMMERCE COMMERCIAL BANK COMMERCIAL BANKS COMPANY CORPORATE ACQUISITIONS CORPORATE FINANCE CORPORATE GOVERNANCE CORPORATIONS CORRUPTION CREDIT ALLOCATION DEBT DEPOSIT DEPOSIT INSURANCE DEPOSITS DEVELOPMENT ECONOMICS DIVERSIFICATION DIVIDEND POLICY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC REFORMS ECONOMIC SUCCESS ECONOMICS EDUCATION LEVEL EMPLOYEE EMPLOYER EMPLOYMENT EMPLOYMENT DYNAMICS EMPLOYMENT LEVELS EMPLOYMENT PROTECTION LEGISLATION ENTREPRENEURIAL ACTIVITY ENTREPRENEURSHIP EXPANSION EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL OUTREACH FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR REFORMS FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FIRM GROWTH FIRM PERFORMANCE FIRM SIZE FIRM SIZE DISTRIBUTION FIRMS FLEXIBLE LABOR MARKETS FOREIGN BANKS FORMAL FINANCIAL INSTITUTION GROWTH OPPORTUNITIES INCOME INDUSTRY CHARACTERISTICS INEQUALITY INFLEXIBLE LABOR INFORMAL FINANCE INFORMAL SECTOR INTERNATIONAL BANK JOB CREATION LABOR FORCE LABOR INTENSITY LABOR LAWS LABOR MARKET INSTITUTIONS LABOR MARKET OUTCOMES LABOR MARKET REGULATION LABOR MARKET REGULATIONS LABOR MARKETS LABOR PRODUCTIVITY LABOR REGULATION LABOR REGULATIONS LABOUR LABOUR MARKET LABOUR MARKET REGULATION LAWS LEGISLATION LENDING DECISIONS LICENSING LINES OF CREDIT MACROECONOMICS MANUFACTURING INDUSTRIES MARKET LIBERALIZATION MERCHANTS MIGRATION MULTIPLIER EFFECT NATIONALIZED BANKS NEW BUSINESSES OUTPUTS PLANT SIZE PRIVATE BANKS PRIVATE CREDIT PRIVATE EQUITY PRIVATE SECTOR PRIVATE SECTOR BANKS PRODUCT MARKETS PRODUCTION PROCESS PRODUCTIVITY PROFITABILITY REGIONAL RURAL BANKS RESERVE BANK OF INDIA RIGID LABOR MARKET SIZE OF FIRMS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL ENTERPRISES SMALL FIRM SMALL FIRMS SOCIAL BANKING SOCIAL CAPITAL STATE OWNED BANKS STOCK MARKETS TRADE REFORMS TRANSPORT UNEMPLOYMENT UNION UNPAID FAMILY WORKERS URBAN AREAS VILLAGES WAGES WATER SUPPLY WORKER WORKERS
spellingShingle	ACCESS TO BANKING ACCESS TO BANKING SERVICES ACCOUNTING AGE GROUP AGE GROUPS BANK BRANCH BANK BRANCHES BANK CREDIT BANK FINANCING BANKING REFORM BANKING REGULATION BANKING SECTOR BANKING SERVICES BANKING SYSTEM BANKING SYSTEMS BANKS BRANCH BRANCHES BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS CAPITAL EXPENDITURES CAPITAL MARKET CASH FLOW CHAMBERS OF COMMERCE COMMERCIAL BANK COMMERCIAL BANKS COMPANY CORPORATE ACQUISITIONS CORPORATE FINANCE CORPORATE GOVERNANCE CORPORATIONS CORRUPTION CREDIT ALLOCATION DEBT DEPOSIT DEPOSIT INSURANCE DEPOSITS DEVELOPMENT ECONOMICS DIVERSIFICATION DIVIDEND POLICY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC REFORMS ECONOMIC SUCCESS ECONOMICS EDUCATION LEVEL EMPLOYEE EMPLOYER EMPLOYMENT EMPLOYMENT DYNAMICS EMPLOYMENT LEVELS EMPLOYMENT PROTECTION LEGISLATION ENTREPRENEURIAL ACTIVITY ENTREPRENEURSHIP EXPANSION EXTERNAL FINANCE EXTERNAL FINANCING FINANCIAL ACCESS FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL OUTREACH FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTOR REFORMS FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FIRM GROWTH FIRM PERFORMANCE FIRM SIZE FIRM SIZE DISTRIBUTION FIRMS FLEXIBLE LABOR MARKETS FOREIGN BANKS FORMAL FINANCIAL INSTITUTION GROWTH OPPORTUNITIES INCOME INDUSTRY CHARACTERISTICS INEQUALITY INFLEXIBLE LABOR INFORMAL FINANCE INFORMAL SECTOR INTERNATIONAL BANK JOB CREATION LABOR FORCE LABOR INTENSITY LABOR LAWS LABOR MARKET INSTITUTIONS LABOR MARKET OUTCOMES LABOR MARKET REGULATION LABOR MARKET REGULATIONS LABOR MARKETS LABOR PRODUCTIVITY LABOR REGULATION LABOR REGULATIONS LABOUR LABOUR MARKET LABOUR MARKET REGULATION LAWS LEGISLATION LENDING DECISIONS LICENSING LINES OF CREDIT MACROECONOMICS MANUFACTURING INDUSTRIES MARKET LIBERALIZATION MERCHANTS MIGRATION MULTIPLIER EFFECT NATIONALIZED BANKS NEW BUSINESSES OUTPUTS PLANT SIZE PRIVATE BANKS PRIVATE CREDIT PRIVATE EQUITY PRIVATE SECTOR PRIVATE SECTOR BANKS PRODUCT MARKETS PRODUCTION PROCESS PRODUCTIVITY PROFITABILITY REGIONAL RURAL BANKS RESERVE BANK OF INDIA RIGID LABOR MARKET SIZE OF FIRMS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL ENTERPRISES SMALL FIRM SMALL FIRMS SOCIAL BANKING SOCIAL CAPITAL STATE OWNED BANKS STOCK MARKETS TRADE REFORMS TRANSPORT UNEMPLOYMENT UNION UNPAID FAMILY WORKERS URBAN AREAS VILLAGES WAGES WATER SUPPLY WORKER WORKERS Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav Does Local Financial Development Matter for Firm Lifecycle in India?
geographic_facet	South Asia India
relation	Policy Research Working Paper;No. 7008
description	The differences in financial development across Indian states, while seeming substantial, have a minor effect on firm lifecycle and growth. These results hold controlling for differences in labor regulations across states, capital intensity, and for firms born before and after the major reforms. There is no evidence that firms in financially dependent industries have different lifecycle profiles or grow faster in financially developed states than underdeveloped states. Overall, firms in the formal manufacturing sector grow as they age whereas in the informal sector, firms have a declining lifecycle, but in both cases little evidence is found that financial institutions matter for firm lifecycle. The findings of this paper suggest that size and depth differences in financial development across Indian states are likely dwarfed by overall inefficiencies that characterize state-dominated financial systems, with important implications for the reforms of the Indian financial system going forward.
format	Publications & Research :: Policy Research Working Paper
author	Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav
author_facet	Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav
author_sort	Ayyagari, Meghana
title	Does Local Financial Development Matter for Firm Lifecycle in India?
title_short	Does Local Financial Development Matter for Firm Lifecycle in India?
title_full	Does Local Financial Development Matter for Firm Lifecycle in India?
title_fullStr	Does Local Financial Development Matter for Firm Lifecycle in India?
title_full_unstemmed	Does Local Financial Development Matter for Firm Lifecycle in India?
title_sort	does local financial development matter for firm lifecycle in india?
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/08/20132223/local-financial-development-matter-firm-lifecycle-india http://hdl.handle.net/10986/20349
_version_	1764445100556943360

Does Local Financial Development Matter for Firm Lifecycle in India?

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