Financing Patterns Around the World: The Role of Institutions

55 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

Thorsten Beck

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

Date Written: October 2002

Abstract

Using a firm-level survey database covering 48 countries, Beck, Demirgüç-Kunt, and Maksimovic investigate whether differences in financial and legal development affect the way firms finance their investments. The results indicate that external financing of investments is not a function of institutions, although the form of external finance is. The authors identify two explanations for this. First, legal and financial institutions affect different types of external finance in offsetting ways. Second, firm size is an important determinant of whether firms can have access to different types of external finance. Larger firms with financing needs are more likely to use external finance compared with small firms. The results also indicate that these firms are more likely to use external finance in more developed financial systems, particularly debt and equity finance. The authors also find evidence consistent with the pecking order theory in financially developed countries, particularly for large firms.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand firms' access to financial services.

Suggested Citation

Demirgüç-Kunt, Asli and Maksimovic, Vojislav and Beck, Thorsten, Financing Patterns Around the World: The Role of Institutions (October 2002). World Bank Policy Research Working Paper No. 2905. Available at SSRN: https://ssrn.com/abstract=636268

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/

Thorsten Beck

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

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