Financing patterns around the world: the role of institutions

Thorsten Beck, Asli Demirguc-Kunt and Vojislav Maksimovic

No 2905, Policy Research Working Paper Series from The World Bank

Abstract: Using a firm-level survey database covering 48 countries, the authors investigate whether differences in financial and legal development affect the way firms finance their investments. The results indicate that external financing of investments is not a function of institutions, although the form of external finance is. The authors identify two explanations for this. First, legal and financial institutions affect different types of external finance in offsetting ways. Second, firm size is an important determinant of whether firms can have access to different types of external finance. Larger firms with financing needs are more likely touse external finance compared with small firms. The results also indicate that these firms are more likely to use external finance in more developed financial systems, particularly debt and equity finance. The authors also find evidence consistent with the pecking order theory in financially developed countries, particularly for large firms.

Keywords: Payment Systems&Infrastructure; Banks&Banking Reform; Financial Intermediation; International Terrorism&Counterterrorism; Decentralization; Financial Intermediation; Housing Finance; Banks&Banking Reform; National Governance; Economic Theory&Research (search for similar items in EconPapers)
Date: 2002-10-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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