State-Business Relations and Financial Accessibility: Explaining Firm Performance in the MENA Region

Burhan Karahasan and Firat Bilgel

No 1279, Working Papers from Economic Research Forum

Abstract: This study investigates the triangular relationship among state-business relations, financial access and economic performance using _rm-level data for selected Middle East and North African countries. We hypothesize that financial intermediation acts as a mediating factor in the relationship between state-business relations and _rm performance. Employing a causal mediation analysis, our results show that inefficient ties with the state is a cause of poor _rm performance. Depending on the performance measure, inefficient state-business relations reduce _rm performance by about 2.3-4.4 percent through access to finance and by about 12 to 40 percent via its direct effect. About 3 to 16 percent of the total effect is mediated through financial access while the remaining is the direct effect of inefficient state-business relations on firm performance. Our results highlight that financial intermediation is a significant mediating factor in the mechanism between state-business relations and firm performance.

Pages: 42 pages
Date: 2018-12-26, Revised 2018-12-26
New Economics Papers: this item is included in nep-ara and nep-eff
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