EconPapers    
Economics at your fingertips  
 

Unbundling institutions for external finance: Worldwide firm-level evidence

Stephen Knack and Lixin Xu ()

Journal of Corporate Finance, 2017, vol. 44, issue C, 215-232

Abstract: The literature on institutions 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. We focus on the effect on firm-level external finance, and “unbundle” institutions in the sense of Acemoglu and Johnson (2005), while addressing the largely-ignored issue of measurement error in institutional indicators. We find that contracting institutions that facilitate transactions between private parties exert little effect on firms' access to external finance. In contrast, property rights institutions that constrain political and economic elites exhibit a strong positive association with access to external finance. Interestingly, the association between property rights institutions and external finance tends to be stronger for working capital than for investment. Our results suggest that an important channel for institutions and especially property right institutions to affect development is through access to external finance.

Keywords: Access to finance; Unbundling institutions; Contracting institutions; Property rights institutions; Firm size (search for similar items in EconPapers)
JEL-codes: G20 G30 G38 K20 K40 O10 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119917300834
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Unbundling institutions for external finance: worldwide firm-level evidence (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:44:y:2017:i:c:p:215-232

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-06-08
Handle: RePEc:eee:corfin:v:44:y:2017:i:c:p:215-232