Financial Constraints and Investment: Assessing the Impact of a World Bank Credit Program on Small and Medium Enterprises in Sri Lanka

26 Pages Posted: 2 Apr 2008

See all articles by Varouj A. Aivazian

Varouj A. Aivazian

University of Toronto - Rotman School of Management

Eric B. Santor

Bank of Canada - International Relations Department

Abstract

This paper examines the investment behavior of a sample of small, credit-constrained firms in Sri Lanka. Using a unique panel data set, we analyze and compare the activities of two groups of small firms distinguished by their differential access to financing: one group consists of firms with subsidized loans from the World Bank, while the other group consists of firms without such subsidies. The paper shows that the program led to higher levels of investment for financially constrained firms. However, the evidence is inconclusive on whether the program improved economic efficiency.

Suggested Citation

Aivazian, Varouj A. and Santor, Eric B., Financial Constraints and Investment: Assessing the Impact of a World Bank Credit Program on Small and Medium Enterprises in Sri Lanka. Canadian Journal of Economics/Revue canadienne d''économique, Vol. 41, No. 2, pp. 475-500, May/mai 2008. Available at SSRN: https://ssrn.com/abstract=1115496 or http://dx.doi.org/10.1111/j.1540-5982.2008.00471.x

Varouj A. Aivazian

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Department of Economics
Toronto, Ontario M5S 3E6
Canada
416-978-2375 (Phone)
416-978-5433 (Fax)

Eric B. Santor (Contact Author)

Bank of Canada - International Relations Department ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

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