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Financing Patterns Around the World: The Role of Institutions

Asli Demirguc-Kunt
World Bank - Development Research Group (DECRG)

Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business

Thorsten Beck
Professor, CentER, European Banking Center, Tilburg University


October 2002

World Bank Policy Research Working Paper No. 2905

Abstract:     
Using a firm-level survey database covering 48 countries, Beck, Demirgüç-Kunt, and Maksimovic 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 to use 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.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand firms' access to financial services.

Working Paper Series

Date posted: December 20, 2004 ; Last revised: December 20, 2004

Suggested Citation

Demirguc-Kunt, Asli , Maksimovic, Vojislav and Beck, Thorsten, Financing Patterns Around the World: The Role of Institutions (October 2002). World Bank Policy Research Working Paper No. 2905. Available at SSRN: http://ssrn.com/abstract=636268


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Contact Information

Asli Demirguc-Kunt (Contact Author)
World Bank - Development Research Group (DECRG) ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
202-473-7479 (Phone)
202-522-1155 (Fax)
HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/
Thorsten Beck
Professor, CentER, European Banking Center, Tilburg University ( email )
PO Box 90153
5000 LE Tilburg Netherlands
Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
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References: 34
Citations: 9

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