Access to Finance and Firm Productivity in the Presence of Binding Fiscal Constraints

28 Pages Posted: 21 Jun 2017

See all articles by Zangina Isshaq

Zangina Isshaq

University of Cape Coast

Godfred Alufar Bokpin

University of Ghana - Business School

Date Written: June 20, 2017

Abstract

We examine two key questions in this paper: does access to finance have an association with firm level productivity? And does the fiscal environment have an effect on the relation between access to finance and firm productivity? Our answers are that restrictions to access to finance leads to lower firm productivity and the fiscal policy environment can affect the relation between access to finance and firm productivity. Firm-level total factor productivity is from a Cobb-Douglas production function, which we regress on firm characteristics and fiscal policy indicators. With controls for country and year fixed effects, we find that firms reporting access to finance as a severe obstacle have lower productivity, and productivity declines with age. In restricting the sample to African countries, the fiscal policy effect is not observed directly while it is evident in the global sample but rather through severity of access to credit. Macro-level analysis shows a negative domestic credit to GDP relation with aggregate total factor productivity growth but the value of manufactured exports has a positive relation with aggregate total factor productivity. African countries need to do more to make fiscal policy an enabling mechanism for economic growth.

Keywords: Access to Finance, Total Factor Productivity, Fiscal Policy

JEL Classification: E62, D230, G32

Suggested Citation

Isshaq, Zangina and Bokpin, Godfred Alufar, Access to Finance and Firm Productivity in the Presence of Binding Fiscal Constraints (June 20, 2017). Available at SSRN: https://ssrn.com/abstract=2990097 or http://dx.doi.org/10.2139/ssrn.2990097

Zangina Isshaq

University of Cape Coast ( email )

PMB, UCC, GHANA
Cape Coast, Central Region
Ghana

Godfred Alufar Bokpin (Contact Author)

University of Ghana - Business School ( email )

P.O. Box LG 78
Legon
Accra, Greater Accra LG 78
Ghana

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
104
Abstract Views
554
rank
352,880
PlumX Metrics