Sangam: A Confluence of Knowledge Streams

How Important Are Financing Constraints? The Role of Finance in the Business Environment

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dc.creator Ayyagari, Meghana
dc.creator Demirgüç-Kunt, Asli
dc.creator Maksimovic, Vojislav
dc.date 2012-03-30T07:12:37Z
dc.date 2012-03-30T07:12:37Z
dc.date 2008-12-01
dc.date.accessioned 2023-02-18T19:41:20Z
dc.date.available 2023-02-18T19:41:20Z
dc.identifier World Bank Economic Review
dc.identifier 1564-698X
dc.identifier http://hdl.handle.net/10986/4489
dc.identifier.uri http://localhost:8080/xmlui/handle/CUHPOERS/249974
dc.description What role does the business environment play in promoting or restraining firm growth? Recent literature points to a number of factors as obstacles to growth. Inefficient functioning of financial markets, inadequate security and enforcement of property rights, poor provision of infrastructure, inefficient regulation and taxation, and broader governance features such as corruption and macroeconomic stability are all discussed without any comparative evidence on their ordering. Using firm-level survey data on the relative importance of different features of the business environment, the article finds that although firms report many obstacles to growth, not all the obstacles are equally constraining. Some affect firm growth only indirectly through their influence on other obstacles, or not at all. Analyses using directed acyclic graph methodology and regressions find that only obstacles related to finance, crime, and policy instability directly affect firm growth. The finance result is shown to be the most robust. The results have important implications for the priority of reforms. Maintaining policy stability, keeping crime under control, and undertaking financial sector reforms to relax financing constraints are likely to be the most effective routes to promote firm growth.
dc.publisher World Bank
dc.rights CC BY-NC-ND 3.0 IGO
dc.rights http://creativecommons.org/licenses/by-nc-nd/3.0/igo
dc.rights World Bank
dc.subject biases
dc.subject corruption
dc.subject economic development
dc.subject financial markets
dc.subject financial sector reforms
dc.subject financing obstacles
dc.subject government policies
dc.subject international bank
dc.subject obstacles to growth
dc.subject property rights
dc.title How Important Are Financing Constraints? The Role of Finance in the Business Environment
dc.type Journal Article
dc.type Journal Article
dc.coverage Uzbekistan
dc.coverage Singapore
dc.coverage Uruguay
dc.coverage Wallis and Futuna Islands


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