The absorption of financial services in an Islamic environment

Charilaos Mertzanis

Journal of Economic Behavior & Organization, 2016, vol. 132, issue S, 216-236

Abstract: This study examines the determinants of access to finance by firms residing in 42 Islamic countries. Firm-specific characteristics, such as size, sector, legal status and export status are found to be robust predictors of financing constraints of firms. Small-size firms appear to face more binding financing constraints, whilst firms operating in manufacturing and focusing on exports appear to face lower constraints. The auditing of accounts, the location of operations and ownership structure appear significant with a varying effect on direction. Differences are documented on the role of firm-specific characteristics between Islamic and non-Islamic countries. Both the absolute and relative size of Islamic bank assets is a significant predictor of firms’ financing constraints. The results add new insights on the role of non-economic institutions, social and cultural factors across regions in predicting financing constraints of firms in Islamic countries. Effective financial inclusion reform must focus on small-size, introverted and services-oriented firms operating in some distance from the center as well as understand the divergent role of institutions, social structures and culture within the Islamic world.

Keywords: Financing constraints; Investment models; Islamic countries (search for similar items in EconPapers)
JEL-codes: C83 D03 E22 G30 O16 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:132:y:2016:i:s:p:216-236

DOI: 10.1016/j.jebo.2016.10.025

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