FINANCIAL AND LEGAL CONSTRAINTS TO FIRM GROWTH ….pptVIP

Financial and Legal Constraints to Firm Growth: Does Firm Size Matter? Thorsten Beck, Asli Demirguc-Kunt and Vojislav Maksimovic The issue Recent research in corporate suggests that underdeveloped legal and financial systems constrain firms constraints diminish as financial and legal development occurs These conclusions based on samples of largest firms infer the existence of general constraints do not examine specific constraints In this paper we ... Use detailed firm-level data for 54 countries (World Business Environment Survey) to examine How is firm growth affected by different financial, legal and corruption obstacles? Which specific obstacles have an effect? Are small and medium size enterprises (SMEs) affected differently by different obstacles? Are SMEs constrained everywhere in the same way or much more in countries with underdeveloped financial and legal systems and higher levels of corruption? Background La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1997, 1998) Demirgü?-Kunt and Maksimovic (1998), Rajan and Zingales (1998), Love (2000) King and Levine (1993), Levine and Zervos (1998) and Beck, Levine and Loayza (2000) WBES 4000 firms in 54 countries Stratified sample by number of employees: 5-50; 51-500, 501+ Detailed questions on specific obstacles Detailed obstacles Collateral requirements; bank paperwork; high interest rates; need special connections with banks; banks lack money to lend Availability of info; consistency of interpretation; quality, efficiency; fairness; affordability; consistency of courts; contract enforcement Corruption of bank officials; need to make “additional payments”; proportion of revenues paid as bribes; time spent by management with officials Empirical model firm growth=f(control variables, obstacles) firm growth=f(control variables, obstacles X size) firm growth=f(control variables, obstacles X institutional variables) firm growth=f(control variables, obstacles X size X institutional variables) Control variables F