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

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dc.contributor.authorAyyagari, Meghana
dc.contributor.authorDemirgüç-Kunt, Asli
dc.contributor.authorMaksimovic, Vojislav
dc.date.accessioned2012-06-26T13:48:13Z
dc.date.available2012-06-26T13:48:13Z
dc.date.issued2006-01
dc.description.abstractWhat role does the business environment play in promoting and 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. In this paper, we use firm level survey data to present evidence on the relative importance of different features of the business environment. We find 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. Using Directed Acyclic Graph (DAG) methodology as well as regressions, we find that only obstacles related to Finance, Crime and Policy Instability directly affect the growth rate of firms. Robustness tests further show that the Finance result is the most robust of the three. These results have important policy implications for the priority of reform efforts. Our results show that 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.en
dc.identifierhttp://documents.worldbank.org/curated/en/2006/01/9836091/important-financing-constraints-role-finance-business-environment
dc.identifier.doi10.1596/1813-9450-3820
dc.identifier.urihttps://hdl.handle.net/10986/8998
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper; No. 3820
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABSOLUTE VALUE
dc.subjectACCESS TO CREDIT
dc.subjectACCESS TO EXTERNAL FINANCE
dc.subjectACCESS TO FINANCING
dc.subjectACCOUNTING
dc.subjectBANK EQUITY
dc.subjectBANK PAPERWORK
dc.subjectBANK POLICY
dc.subjectBIASES
dc.subjectBINDING CONSTRAINT
dc.subjectBINDING CONSTRAINTS
dc.subjectBORROWING
dc.subjectBUSINESS ENVIRONMENT
dc.subjectBUSINESS ENVIRONMENTS
dc.subjectCHECKS
dc.subjectCOLLATERAL
dc.subjectCOLLATERAL REQUIREMENTS
dc.subjectCOMMON LAW
dc.subjectCOMPETITORS
dc.subjectCORRUPTION
dc.subjectCOUNTRY DUMMIES
dc.subjectCOUNTRY FIXED EFFECT
dc.subjectCOUNTRY FIXED EFFECTS
dc.subjectCOUNTRY LEVEL
dc.subjectCOUNTRY REGRESSIONS
dc.subjectCOUNTRY-LEVEL INDICATORS
dc.subjectDEMAND FOR CAPITAL
dc.subjectDEPENDENT VARIABLE
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDUMMY VARIABLE
dc.subjectDUMMY VARIABLES
dc.subjectECONOMIC DEVELOPMENT
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC IMPACT
dc.subjectEMPLOYMENT
dc.subjectENTREPRENEURS
dc.subjectEQUIPMENT
dc.subjectERROR TERM
dc.subjectESTIMATED COEFFICIENTS
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATES
dc.subjectEXCLUSION
dc.subjectEXPANSION
dc.subjectEXPLANATORY VARIABLES
dc.subjectEXPORTER
dc.subjectEXTERNAL FINANCE
dc.subjectEXTERNAL FINANCING
dc.subjectFARMERS
dc.subjectFINANCE ACCESS
dc.subjectFINANCIAL DEVELOPMENT
dc.subjectFINANCIAL INFORMATION
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectFINANCIAL INTERMEDIATION
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL OBSTACLE
dc.subjectFINANCIAL OBSTACLES
dc.subjectFINANCIAL POLICIES
dc.subjectFINANCIAL SECTOR
dc.subjectFINANCIAL SECTOR REFORM
dc.subjectFINANCIAL SECTOR REFORMS
dc.subjectFINANCIAL STUDIES
dc.subjectFINANCIAL SYSTEM
dc.subjectFINANCIAL SYSTEMS
dc.subjectFINANCING OBSTACLE
dc.subjectFINANCING OBSTACLES
dc.subjectFIRM GROWTH
dc.subjectFIRM PERFORMANCE
dc.subjectFIRM SIZE
dc.subjectFIRM SIZES
dc.subjectFOREIGN BANKS
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN FIRMS
dc.subjectFOREIGN OWNERSHIP
dc.subjectGOVERNMENT OWNERSHIP
dc.subjectGOVERNMENT POLICIES
dc.subjectGROWTH LITERATURE
dc.subjectGROWTH OPPORTUNITIES
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectGROWTH REGRESSION
dc.subjectGROWTH REGRESSIONS
dc.subjectHIGH GROWTH
dc.subjectHIGH GROWTH RATE
dc.subjectHIGH INCOME COUNTRIES
dc.subjectHIGH INFLATION
dc.subjectHIGH INTEREST RATE
dc.subjectHIGH INTEREST RATES
dc.subjectINCOME
dc.subjectINCOME GROUP
dc.subjectINCOME GROUPS
dc.subjectINCOME LEVEL
dc.subjectINCOME LEVELS
dc.subjectINDEPENDENT VARIABLES
dc.subjectINDIVIDUAL COUNTRIES
dc.subjectINDIVIDUAL FIRM
dc.subjectINDIVIDUAL FIRMS
dc.subjectINFLATION
dc.subjectINFLATION RATES
dc.subjectINFLATION TAX
dc.subjectINSTITUTIONAL DEVELOPMENT
dc.subjectINSTRUMENT
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL ACCOUNTING STANDARDS
dc.subjectINVESTMENT CLIMATE
dc.subjectJUDICIAL EFFICIENCY
dc.subjectLACK OF ACCESS
dc.subjectLATIN AMERICAN
dc.subjectLEASING
dc.subjectLEGAL CONSTRAINTS
dc.subjectLEGAL ENFORCEMENT
dc.subjectLEGAL SYSTEMS
dc.subjectLICENSING
dc.subjectLIMITED ACCESS
dc.subjectLOAN
dc.subjectLONG-TERM CAPITAL
dc.subjectLONG-TERM LOANS
dc.subjectMACROECONOMIC INSTABILITY
dc.subjectMACROECONOMIC POLICIES
dc.subjectMACROECONOMIC STABILITY
dc.subjectMEAN VALUE
dc.subjectMONETARY ECONOMICS
dc.subjectNEGATIVE EFFECT
dc.subjectNEGATIVE IMPACT
dc.subjectNONPAYMENT
dc.subject0 HYPOTHESIS
dc.subjectOBSTACLES TO GROWTH
dc.subjectOUTPUT
dc.subjectPERFORMANCE MEASURES
dc.subjectPOLICY IMPLICATIONS
dc.subjectPOLICY RESEARCH
dc.subjectPRIVATE SECTOR DEVELOPMENT
dc.subjectPROPERTY RIGHTS
dc.subjectPROPERTY RIGHTS PROTECTION
dc.subjectREFORM EFFORTS
dc.subjectRELATIVE IMPORTANCE
dc.subjectSALES GROWTH
dc.subjectSIGNIFICANT IMPACT
dc.subjectSMALL FIRMS
dc.subjectSTANDARD DEVIATION
dc.subjectSUB-SAHARAN AFRICA
dc.subjectTAX
dc.subjectTAXATION
dc.subjectTRANSACTION
dc.subjectTRANSITION COUNTRIES
dc.subjectTRANSITION ECONOMIES
dc.subjectTRINIDAD AND TOBAGO
dc.titleHow Important Are Financing Constraints? The Role of Finance in the Business Environmenten
dspace.entity.typePublication
okr.crossref.titleHow Important Are Financing Constraints ? The Role Of Finance In The Business Environment
okr.date.doiregistration2025-04-10T12:25:39.287148Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2006/01/9836091/important-financing-constraints-role-finance-business-environment
okr.globalpracticePoverty
okr.globalpracticeFinance and Markets
okr.globalpracticeTrade and Competitiveness
okr.guid965401468151486885
okr.identifier.doi10.1596/1813-9450-3820
okr.identifier.externaldocumentum000158349_20080910085903
okr.identifier.internaldocumentum9836091
okr.identifier.reportWPS3820
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/09/10/000158349_20080910085903/Rendered/PDF/WPS3820.pdfen
okr.topicFinance and Financial Sector Development::Microfinance
okr.topicPoverty Reduction::Achieving Shared Growth
okr.topicFinance and Financial Sector Development::Access to Finance
okr.topicPrivate Sector Development::Emerging Markets
okr.topicFinance and Financial Sector Development::Debt Markets
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublication234a20c0-893c-561a-8c90-6f5be5be5b9b
relation.isAuthorOfPublication.latestForDiscovery234a20c0-893c-561a-8c90-6f5be5be5b9b
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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