Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence

European Banking Center Discussion Paper Series No. 2014-008

CentER Discussion Paper Series No. 2014-050

49 Pages Posted: 2 Sep 2014  

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Haki Pamuk IV

Tilburg University

Burak Uras

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Economics

Date Written: September 1, 2014

Abstract

We use a novel enterprise survey from Tanzania to gauge the relationship between saving instruments and entrepreneurial reinvestment. While most informal savings practices do not imply a lower likelihood of entrepreneurial reinvestment when compared with formal savings practices, we find a significantly negative effect of saving within the household on the likelihood of reinvesting entrepreneurial profits. Our results are robust to an extensive list of robustness checks, including controlling for reverse causation and omitted variable biases. Our work contributes to the recent debate on the implications of different saving instruments in developing countries and expands the entrepreneurial financing constraints literature by focusing on internal rather than external fundings constraints.

Keywords: Entrepreneurial finance; savings; reinvestment; financial inclusion.

JEL Classification: D14, G21, O12, O16

Suggested Citation

Beck, Thorsten and Pamuk, Haki and Uras, Burak, Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence (September 1, 2014). European Banking Center Discussion Paper Series No. 2014-008; CentER Discussion Paper Series No. 2014-050. Available at SSRN: https://ssrn.com/abstract=2489811 or http://dx.doi.org/10.2139/ssrn.2489811

Thorsten Beck (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Haki Pamuk IV

Tilburg University ( email )

Burak R. Uras

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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