The Impact of the Business Environment on Young Firm Financing

39 Pages Posted: 20 Apr 2016

See all articles by Larry W. Chavis

Larry W. Chavis

University of North Carolina (UNC) at Chapel Hill - Entrepreneurial Program

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Inessa Love

World Bank - Development Economics Data Group (DECDG)

Date Written: May 1, 2010

Abstract

This paper uses a dataset of more than 70,000 firms in over 100 countries to systematically study the use of different financing sources for new and young firms, in comparison to mature firms. The authors find that in all countries younger firms rely less on bank financing and more on informal financing. However, they also find that younger firms use more bank finance in countries with stronger rule of law and better credit information, and that the reliance of young firms on informal finance decreases with the availability of credit information. Overall, the results suggest that improvements to the legal environment and availability of credit information are disproportionately beneficial for promoting access to formal finance by young firms.

Keywords: Access to Finance, Debt Markets, Bankruptcy and Resolution of Financial Distress, Banks & Banking Reform, Financial Intermediation

Suggested Citation

Chavis, Larry W. and Klapper, Leora F. and Love, Inessa, The Impact of the Business Environment on Young Firm Financing (May 1, 2010). World Bank Policy Research Working Paper No. 5322. Available at SSRN: https://ssrn.com/abstract=1617126

Larry W. Chavis (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Entrepreneurial Program ( email )

Chapel Hill, NC
United States
919-962-8215 (Phone)
919-962-7186 (Fax)

HOME PAGE: http://www.unc.edu/~chavisl

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Inessa Love

World Bank - Development Economics Data Group (DECDG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/ilove

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