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Business Environment and the Incorporation Decision

36 Pages Posted: 20 Apr 2016  

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Inessa Love

World Bank - Development Economics Data Group (DECDG)

Date Written: May 20, 2004

Abstract

Using firm-level data from 52 countries, Demirguc-Kunt, Love, and Maksimovic investigate how a country's institutions and business environment affect firms' organizational choices and the effects of organizational form on access to finance and growth. They find that businesses are more likely to choose the corporate form in countries with developed financial sectors and efficient legal systems, strong shareholder and creditor rights, low regulatory burdens and corporate taxes, and efficient bankruptcy processes. Corporations report fewer financing, legal, and regulatory obstacles than unincorporated firms, and this advantage is greater in countries with more developed institutions and favorable business environments. The authors find some evidence of higher growth of incorporated businesses in countries with good financial and legal institutions.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand firm entry.

Suggested Citation

Demirgüç-Kunt, Asli and Maksimovic, Vojislav and Love, Inessa, Business Environment and the Incorporation Decision (May 20, 2004). World Bank Policy Research Working Paper No. 3317. Available at SSRN: https://ssrn.com/abstract=610362

Asli Demirgüç-Kunt (Contact Author)

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

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

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/

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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