Does Financial Liberalization Reduce Financing Constraints?

40 Pages Posted: 3 Feb 2002

See all articles by Luc Laeven

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2001


This paper uses panel data on a large number of firms in 13 developing countries to find out whether financial liberalization relaxes financing constraints of firms. We find that liberalization affects small and large firms differently. Small firms are financially constrained before the start of the liberalization process, but become less so after liberalization. Financing constraints of large firms, however, are low before financial liberalization, but become higher as financial liberalization proceeds. We hypothesize that financial liberalization has adverse effects on the financing constraints of large firms, because these firms had better access to preferential directed credit during the period before financial liberalization.

JEL Classification: E22, E44, G31, O16

Suggested Citation

Laeven, Luc A., Does Financial Liberalization Reduce Financing Constraints? (November 2001). Available at SSRN: or

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Centre for Economic Policy Research (CEPR)

United Kingdom

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