Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence
The empirical literature on institutions and development has been challenged on grounds of reverse causality, measurement error in institutional indicators, and heterogeneity. This paper uses firm-level data across countries to confront these chall...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/06/24578640/unbundling-institutions-external-finance-worldwide-firm-level-evidence http://hdl.handle.net/10986/22160 |
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okr-10986-22160 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
DEPOSIT BORROWER CONTRACT RIGHTS ECONOMIC GROWTH TRADE CREDIT CHECKS PEOPLE DEFAULTS CONFLICT OF INTEREST FINANCING STOCK BRIBES MICRO-ENTERPRISES INTEREST CORPORATE INSIDERS BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET EQUITY MARKET DEBTOR BANKING SYSTEMS ACCESS TO EXTERNAL FINANCE DEPOSIT MONEY BANKS REINVESTMENT RATES LOAN CREDIT ALLOCATION FORMAL FINANCE ENDOWMENT BORROWERS PRIVATE PROPERTY CORRUPTION BANKRUPTCY CENTRAL BANKS INTERNATIONAL BANK CREDITORS INFLATION CREDITOR LENDER CREDIT BANK CAPITAL FINANCE INSTRUMENTS DISPUTE RESOLUTION CREDIBILITY ACCESS TO INVESTMENT EXTERNAL FINANCE BIASES SMALL BUSINESS JUDICIAL INDEPENDENCE SAVINGS EQUAL TREATMENT MARKET DEVELOPMENT GROWTH OPPORTUNITIES CONTRACTS INFORMAL FINANCE CORPORATE FINANCE INVESTMENT FUNDS PAYMENT FINANCIAL INSTITUTIONS MARKETS DEBT FINANCIAL REGULATIONS INFLATION RATE CREDITOR RIGHTS LENDERS LOCAL STOCK MARKET INCOME LEVELS FIXED ASSET ENTERPRISES BANK CREDIT GROSS DOMESTIC PRODUCT RULE OF LAW FINANCIAL SYSTEM LEGAL FRAMEWORK BANK FINANCING FINANCE MICRO ENTERPRISES BANKS INFORMATION ASYMMETRY JUDICIAL SYSTEM TRANSACTIONS MINORITY SHAREHOLDER PROTECTION BANKRUPTCY LAWS EQUITY INVESTORS HUMAN CAPITAL PROPERTY RIGHT GOOD CAPITAL TRANSPARENCY COUNTRY RISK ACCESS TO FINANCE EXPROPRIATION RISK BANK RETURNS CREDIT ACCESSIBILITY WORKING CAPITAL CONTRACT EXTERNAL FUNDS FINANCIAL PERFORMANCE ENTERPRISE PROPERTY PRIVATE PARTIES JOB CREATION MINORITY SHAREHOLDER SHARES FINANCIAL ACCESS MARKET STOCK MARKET DEVELOPMENT MINORITY SHAREHOLDERS FINANCIAL SERVICE SECURITIES SHAREHOLDERS DEVELOPMENT OF BANKING ACCESS TO CREDIT EXPROPRIATION ECONOMIC DEVELOPMENT INTERESTS FINANCING OBSTACLES INVESTOR PROTECTIONS INVESTOR CORPORATE DEBT GOODS FIXED ASSETS LEGAL SYSTEM FINANCIAL DEVELOPMENT DURABLE EQUITY MARKETS INVESTMENT FINANCIAL INTERMEDIATION LEGAL PROTECTION FINANCIAL INTERMEDIARIES SHARE INVESTOR PROTECTION COLLATERAL JUDICIAL SYSTEMS INTERNAL FUNDS SALES GROWTH FINANCIAL MARKETS FINANCIAL CAPACITY FINANCIAL ASSETS INSTITUTIONAL DEVELOPMENT REINVESTMENT EARNINGS INVESTMENTS LENDING SHAREHOLDER EXTERNAL FINANCING INSTRUMENT MICRO DATA FINANCIAL SYSTEMS LIABILITIES PROPERTY RIGHTS PROTECTION STOCK MARKETS PROTECTION OF MINORITY SHAREHOLDERS FINANCIAL DEPTH MICROENTERPRISES DEBT MATURITY EMPLOYEES |
| spellingShingle |
DEPOSIT BORROWER CONTRACT RIGHTS ECONOMIC GROWTH TRADE CREDIT CHECKS PEOPLE DEFAULTS CONFLICT OF INTEREST FINANCING STOCK BRIBES MICRO-ENTERPRISES INTEREST CORPORATE INSIDERS BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET EQUITY MARKET DEBTOR BANKING SYSTEMS ACCESS TO EXTERNAL FINANCE DEPOSIT MONEY BANKS REINVESTMENT RATES LOAN CREDIT ALLOCATION FORMAL FINANCE ENDOWMENT BORROWERS PRIVATE PROPERTY CORRUPTION BANKRUPTCY CENTRAL BANKS INTERNATIONAL BANK CREDITORS INFLATION CREDITOR LENDER CREDIT BANK CAPITAL FINANCE INSTRUMENTS DISPUTE RESOLUTION CREDIBILITY ACCESS TO INVESTMENT EXTERNAL FINANCE BIASES SMALL BUSINESS JUDICIAL INDEPENDENCE SAVINGS EQUAL TREATMENT MARKET DEVELOPMENT GROWTH OPPORTUNITIES CONTRACTS INFORMAL FINANCE CORPORATE FINANCE INVESTMENT FUNDS PAYMENT FINANCIAL INSTITUTIONS MARKETS DEBT FINANCIAL REGULATIONS INFLATION RATE CREDITOR RIGHTS LENDERS LOCAL STOCK MARKET INCOME LEVELS FIXED ASSET ENTERPRISES BANK CREDIT GROSS DOMESTIC PRODUCT RULE OF LAW FINANCIAL SYSTEM LEGAL FRAMEWORK BANK FINANCING FINANCE MICRO ENTERPRISES BANKS INFORMATION ASYMMETRY JUDICIAL SYSTEM TRANSACTIONS MINORITY SHAREHOLDER PROTECTION BANKRUPTCY LAWS EQUITY INVESTORS HUMAN CAPITAL PROPERTY RIGHT GOOD CAPITAL TRANSPARENCY COUNTRY RISK ACCESS TO FINANCE EXPROPRIATION RISK BANK RETURNS CREDIT ACCESSIBILITY WORKING CAPITAL CONTRACT EXTERNAL FUNDS FINANCIAL PERFORMANCE ENTERPRISE PROPERTY PRIVATE PARTIES JOB CREATION MINORITY SHAREHOLDER SHARES FINANCIAL ACCESS MARKET STOCK MARKET DEVELOPMENT MINORITY SHAREHOLDERS FINANCIAL SERVICE SECURITIES SHAREHOLDERS DEVELOPMENT OF BANKING ACCESS TO CREDIT EXPROPRIATION ECONOMIC DEVELOPMENT INTERESTS FINANCING OBSTACLES INVESTOR PROTECTIONS INVESTOR CORPORATE DEBT GOODS FIXED ASSETS LEGAL SYSTEM FINANCIAL DEVELOPMENT DURABLE EQUITY MARKETS INVESTMENT FINANCIAL INTERMEDIATION LEGAL PROTECTION FINANCIAL INTERMEDIARIES SHARE INVESTOR PROTECTION COLLATERAL JUDICIAL SYSTEMS INTERNAL FUNDS SALES GROWTH FINANCIAL MARKETS FINANCIAL CAPACITY FINANCIAL ASSETS INSTITUTIONAL DEVELOPMENT REINVESTMENT EARNINGS INVESTMENTS LENDING SHAREHOLDER EXTERNAL FINANCING INSTRUMENT MICRO DATA FINANCIAL SYSTEMS LIABILITIES PROPERTY RIGHTS PROTECTION STOCK MARKETS PROTECTION OF MINORITY SHAREHOLDERS FINANCIAL DEPTH MICROENTERPRISES DEBT MATURITY EMPLOYEES Knack, Steve Xu, Lixin Colin Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| relation |
Policy Research Working Paper;No. 7287 |
| description |
The empirical literature on institutions
and development has been challenged on grounds of reverse
causality, measurement error in institutional indicators,
and heterogeneity. This paper uses firm-level data across
countries to confront these challenges. Instead of analyzing
ultimate outcomes, such as income levels where institutional
quality is likely endogenous, the focus is on firm-level
external finance. Moreover, institutions are “unbundled” to
explore how various types of institutions affect external
finance differently. The paper documents that micro firms
have significantly less access to external finance than
small and medium firms. General financial development and
contracting institutions that facilitate transactions
between private parties exert little effect, on average, on
firms’ access to external finance. In contrast, property
rights institutions that constrain political and economic
elites exhibit stronger positive association with access to
external finance. The analysis finds evidence of attenuation
bias associated with error in measuring institutions. For
leveling the playing field between elite and non-elite
firms (as proxied by firm size) in their access to external
finance, property rights institutions also figure more
prominently—with an important exception for the information
environment, a component of contracting institutions. The
results indicate that a specific channel through which
development is affected more by property rights institutions
rather than contracting institutions is external financing
for firms. |
| format |
Working Paper |
| author |
Knack, Steve Xu, Lixin Colin |
| author_facet |
Knack, Steve Xu, Lixin Colin |
| author_sort |
Knack, Steve |
| title |
Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| title_short |
Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| title_full |
Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| title_fullStr |
Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| title_full_unstemmed |
Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence |
| title_sort |
unbundling institutions for external finance : worldwide firm-level evidence |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2015/06/24578640/unbundling-institutions-external-finance-worldwide-firm-level-evidence http://hdl.handle.net/10986/22160 |
| _version_ |
1764450315610882048 |
| spelling |
okr-10986-221602021-04-23T14:04:07Z Unbundling Institutions for External Finance : Worldwide Firm-Level Evidence Knack, Steve Xu, Lixin Colin DEPOSIT BORROWER CONTRACT RIGHTS ECONOMIC GROWTH TRADE CREDIT CHECKS PEOPLE DEFAULTS CONFLICT OF INTEREST FINANCING STOCK BRIBES MICRO-ENTERPRISES INTEREST CORPORATE INSIDERS BIAS PROPERTY RIGHTS PRIVATE CREDIT EXCHANGE STOCK MARKET EQUITY MARKET DEBTOR BANKING SYSTEMS ACCESS TO EXTERNAL FINANCE DEPOSIT MONEY BANKS REINVESTMENT RATES LOAN CREDIT ALLOCATION FORMAL FINANCE ENDOWMENT BORROWERS PRIVATE PROPERTY CORRUPTION BANKRUPTCY CENTRAL BANKS INTERNATIONAL BANK CREDITORS INFLATION CREDITOR LENDER CREDIT BANK CAPITAL FINANCE INSTRUMENTS DISPUTE RESOLUTION CREDIBILITY ACCESS TO INVESTMENT EXTERNAL FINANCE BIASES SMALL BUSINESS JUDICIAL INDEPENDENCE SAVINGS EQUAL TREATMENT MARKET DEVELOPMENT GROWTH OPPORTUNITIES CONTRACTS INFORMAL FINANCE CORPORATE FINANCE INVESTMENT FUNDS PAYMENT FINANCIAL INSTITUTIONS MARKETS DEBT FINANCIAL REGULATIONS INFLATION RATE CREDITOR RIGHTS LENDERS LOCAL STOCK MARKET INCOME LEVELS FIXED ASSET ENTERPRISES BANK CREDIT GROSS DOMESTIC PRODUCT RULE OF LAW FINANCIAL SYSTEM LEGAL FRAMEWORK BANK FINANCING FINANCE MICRO ENTERPRISES BANKS INFORMATION ASYMMETRY JUDICIAL SYSTEM TRANSACTIONS MINORITY SHAREHOLDER PROTECTION BANKRUPTCY LAWS EQUITY INVESTORS HUMAN CAPITAL PROPERTY RIGHT GOOD CAPITAL TRANSPARENCY COUNTRY RISK ACCESS TO FINANCE EXPROPRIATION RISK BANK RETURNS CREDIT ACCESSIBILITY WORKING CAPITAL CONTRACT EXTERNAL FUNDS FINANCIAL PERFORMANCE ENTERPRISE PROPERTY PRIVATE PARTIES JOB CREATION MINORITY SHAREHOLDER SHARES FINANCIAL ACCESS MARKET STOCK MARKET DEVELOPMENT MINORITY SHAREHOLDERS FINANCIAL SERVICE SECURITIES SHAREHOLDERS DEVELOPMENT OF BANKING ACCESS TO CREDIT EXPROPRIATION ECONOMIC DEVELOPMENT INTERESTS FINANCING OBSTACLES INVESTOR PROTECTIONS INVESTOR CORPORATE DEBT GOODS FIXED ASSETS LEGAL SYSTEM FINANCIAL DEVELOPMENT DURABLE EQUITY MARKETS INVESTMENT FINANCIAL INTERMEDIATION LEGAL PROTECTION FINANCIAL INTERMEDIARIES SHARE INVESTOR PROTECTION COLLATERAL JUDICIAL SYSTEMS INTERNAL FUNDS SALES GROWTH FINANCIAL MARKETS FINANCIAL CAPACITY FINANCIAL ASSETS INSTITUTIONAL DEVELOPMENT REINVESTMENT EARNINGS INVESTMENTS LENDING SHAREHOLDER EXTERNAL FINANCING INSTRUMENT MICRO DATA FINANCIAL SYSTEMS LIABILITIES PROPERTY RIGHTS PROTECTION STOCK MARKETS PROTECTION OF MINORITY SHAREHOLDERS FINANCIAL DEPTH MICROENTERPRISES DEBT MATURITY EMPLOYEES The empirical literature on institutions and development has been challenged on grounds of reverse causality, measurement error in institutional indicators, and heterogeneity. This paper uses firm-level data across countries to confront these challenges. Instead of analyzing ultimate outcomes, such as income levels where institutional quality is likely endogenous, the focus is on firm-level external finance. Moreover, institutions are “unbundled” to explore how various types of institutions affect external finance differently. The paper documents that micro firms have significantly less access to external finance than small and medium firms. General financial development and contracting institutions that facilitate transactions between private parties exert little effect, on average, on firms’ access to external finance. In contrast, property rights institutions that constrain political and economic elites exhibit stronger positive association with access to external finance. The analysis finds evidence of attenuation bias associated with error in measuring institutions. For leveling the playing field between elite and non-elite firms (as proxied by firm size) in their access to external finance, property rights institutions also figure more prominently—with an important exception for the information environment, a component of contracting institutions. The results indicate that a specific channel through which development is affected more by property rights institutions rather than contracting institutions is external financing for firms. 2015-07-14T21:31:36Z 2015-07-14T21:31:36Z 2015-06 Working Paper http://documents.worldbank.org/curated/en/2015/06/24578640/unbundling-institutions-external-finance-worldwide-firm-level-evidence http://hdl.handle.net/10986/22160 English en_US Policy Research Working Paper;No. 7287 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |