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Financial and Legal Institutions and Firm Size

Author: Thorsten Beck

Publisher:

Published: 2016

Total Pages: 46

ISBN-13:

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Beck, Demirguc-Kunt, and Maksimovic investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the banking system and the efficiency of the legal system. Thus, the authors find no evidence that firms are larger in order to internalize the functions of the banking system or to compensate for the general inefficiency of the legal system. But they do find evidence that externally financed firms are smaller in countries that have strong creditor rights and efficient legal systems. This suggests that firms in countries with weak creditor protections are larger in order to internalize the protection of capital investment.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the determinants of firm size.

Book Synopsis Financial and Legal Institutions and Firm Size by : Thorsten Beck

Download or read book Financial and Legal Institutions and Firm Size written by Thorsten Beck and published by . This book was released on 2016 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beck, Demirguc-Kunt, and Maksimovic investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the banking system and the efficiency of the legal system. Thus, the authors find no evidence that firms are larger in order to internalize the functions of the banking system or to compensate for the general inefficiency of the legal system. But they do find evidence that externally financed firms are smaller in countries that have strong creditor rights and efficient legal systems. This suggests that firms in countries with weak creditor protections are larger in order to internalize the protection of capital investment.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the determinants of firm size.

Financial and Legal Institutions and Firm Size

Author: Thorsten Beck

Publisher: World Bank Publications

Published: 2003

Total Pages: 52

ISBN-13:

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The authors investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the banking system and the efficiency of the legal system. Thus, the authors find no evidence that firms are larger in order to internalize the functions of the banking system or to compensate for the general inefficiency of the legal system. But they do find evidence that externally financed firms are smaller in countries that have strong creditor rights and efficient legal systems. This suggests that firms in countries with weak creditor protections are larger in order to internalize the protection of capital investment.

Book Synopsis Financial and Legal Institutions and Firm Size by : Thorsten Beck

Download or read book Financial and Legal Institutions and Firm Size written by Thorsten Beck and published by World Bank Publications. This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the banking system and the efficiency of the legal system. Thus, the authors find no evidence that firms are larger in order to internalize the functions of the banking system or to compensate for the general inefficiency of the legal system. But they do find evidence that externally financed firms are smaller in countries that have strong creditor rights and efficient legal systems. This suggests that firms in countries with weak creditor protections are larger in order to internalize the protection of capital investment.

The Quality of the Legal System, Firm Ownership, and Firm Size

Author: Luc Laeven

Publisher: World Bank Publications

Published:

Total Pages: 55

ISBN-13:

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Book Synopsis The Quality of the Legal System, Firm Ownership, and Firm Size by : Luc Laeven

Download or read book The Quality of the Legal System, Firm Ownership, and Firm Size written by Luc Laeven and published by World Bank Publications. This book was released on with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Financial and Legal Constraints to Firm Growth

Author: Thorsten Beck

Publisher: World Bank Publications

Published: 2002

Total Pages: 58

ISBN-13:

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Book Synopsis Financial and Legal Constraints to Firm Growth by : Thorsten Beck

Download or read book Financial and Legal Constraints to Firm Growth written by Thorsten Beck and published by World Bank Publications. This book was released on 2002 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Financial and Legal Constraints to Firm Growth

Author: Thorsten Beck

Publisher:

Published: 2013

Total Pages:

ISBN-13:

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Using a unique firm-level survey data base, covering fifty four countries, the authors investigate whether different financial, legal, and corruption issues that firms report as constraints, actually affect their growth rates. The results show that the extent to which these factors constrain a firm's growth depends very much on its size, and that it is consistently the smallest firms that are most adversely affected by all these constraints. Firm growth is more affected by reported constraints in countries with underdeveloped financial, and legal systems, and higher corruption. So, policy measures to improve financial, and legal development, and reduce corruption are well justified in promoting firm growth, particularly the development of the small, and medium enterprise sector. But the evidence also shows that the intuitive descriptors of an "efficient" legal system, are not correlated with the components of the general legal constraints that predict firm growth. This finding suggests that the mechanism by which the legal system affects firm performance, is not well understood. The authors' findings also provide evidence that the corruption of bank officials, constraints firm growth. This "institutional failure" should be taken into account, when modeling the monitoring role of financial institutions in overcoming market failures due to informational asymmetries.

Book Synopsis Financial and Legal Constraints to Firm Growth by : Thorsten Beck

Download or read book Financial and Legal Constraints to Firm Growth written by Thorsten Beck and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a unique firm-level survey data base, covering fifty four countries, the authors investigate whether different financial, legal, and corruption issues that firms report as constraints, actually affect their growth rates. The results show that the extent to which these factors constrain a firm's growth depends very much on its size, and that it is consistently the smallest firms that are most adversely affected by all these constraints. Firm growth is more affected by reported constraints in countries with underdeveloped financial, and legal systems, and higher corruption. So, policy measures to improve financial, and legal development, and reduce corruption are well justified in promoting firm growth, particularly the development of the small, and medium enterprise sector. But the evidence also shows that the intuitive descriptors of an "efficient" legal system, are not correlated with the components of the general legal constraints that predict firm growth. This finding suggests that the mechanism by which the legal system affects firm performance, is not well understood. The authors' findings also provide evidence that the corruption of bank officials, constraints firm growth. This "institutional failure" should be taken into account, when modeling the monitoring role of financial institutions in overcoming market failures due to informational asymmetries.

The Quality of the Legal System, Firm Ownership, and Firm Size

Author: Luc Laeven

Publisher:

Published: 2004

Total Pages: 60

ISBN-13:

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Book Synopsis The Quality of the Legal System, Firm Ownership, and Firm Size by : Luc Laeven

Download or read book The Quality of the Legal System, Firm Ownership, and Firm Size written by Luc Laeven and published by . This book was released on 2004 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Financial and Legal Constraints to Firm Growth

Author: Vojislav Maksimovic

Publisher:

Published: 2016

Total Pages: 56

ISBN-13:

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Using a unique firm-level survey data base covering 54 countries, Beck, Demirguc-Kunt, and Maksimovic investigate whether different financial, legal, and corruption issues that firms report as constraints actually affect their growth rates. The results show that the extent to which these factors constrain a firm's growth depends very much on its size and that it is consistently the smallest firms that are most adversely affected by all three constraints. Firm growth is more affected by reported constraints in countries with underdeveloped financial and legal systems and higher corruption. So, policy measures to improve financial and legal development and reduce corruption are well justified in promoting firm growth, particularly the development of the small and medium enterprise sector. But the evidence also shows that the intuitive descriptors of an quot;efficientquot; legal system are not correlated with the components of the general legal constraints that predict firm growth. This finding suggests that the mechanism by which the legal systems affects firm performance is not well understood. The authors' findings also provide evidence that the corruption of bank officials constrains firm growth. This quot;institutional failurequot; should be taken into account when modeling the monitoring role of financial institutions in overcoming market failures due to informational asymmetries.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the link from the financial sector to economic development. The authors may be contacted at [email protected], [email protected], or [email protected].

Book Synopsis Financial and Legal Constraints to Firm Growth by : Vojislav Maksimovic

Download or read book Financial and Legal Constraints to Firm Growth written by Vojislav Maksimovic and published by . This book was released on 2016 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a unique firm-level survey data base covering 54 countries, Beck, Demirguc-Kunt, and Maksimovic investigate whether different financial, legal, and corruption issues that firms report as constraints actually affect their growth rates. The results show that the extent to which these factors constrain a firm's growth depends very much on its size and that it is consistently the smallest firms that are most adversely affected by all three constraints. Firm growth is more affected by reported constraints in countries with underdeveloped financial and legal systems and higher corruption. So, policy measures to improve financial and legal development and reduce corruption are well justified in promoting firm growth, particularly the development of the small and medium enterprise sector. But the evidence also shows that the intuitive descriptors of an quot;efficientquot; legal system are not correlated with the components of the general legal constraints that predict firm growth. This finding suggests that the mechanism by which the legal systems affects firm performance is not well understood. The authors' findings also provide evidence that the corruption of bank officials constrains firm growth. This quot;institutional failurequot; should be taken into account when modeling the monitoring role of financial institutions in overcoming market failures due to informational asymmetries.This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the link from the financial sector to economic development. The authors may be contacted at [email protected], [email protected], or [email protected].

Legal Institutions and Financial Development

Author: Thorsten Beck

Publisher: World Bank Publications

Published: 2003

Total Pages: 41

ISBN-13:

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"Why do some countries have growth-enhancing financial systems, while others do not? Why have some countries developed the necessary investor protection laws and contract-enforcement mechanisms to support financial institutions and markets, while others have not? This paper reviews existing research on the role of legal institutions in shaping financial development"--National Bureau of Economic Research web site

Book Synopsis Legal Institutions and Financial Development by : Thorsten Beck

Download or read book Legal Institutions and Financial Development written by Thorsten Beck and published by World Bank Publications. This book was released on 2003 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Why do some countries have growth-enhancing financial systems, while others do not? Why have some countries developed the necessary investor protection laws and contract-enforcement mechanisms to support financial institutions and markets, while others have not? This paper reviews existing research on the role of legal institutions in shaping financial development"--National Bureau of Economic Research web site

The Quality of the Legal System, Firm Ownership, and Firm Size

Author: Luc Laeven

Publisher:

Published: 2016

Total Pages: 55

ISBN-13:

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Employment in developing countries is disproportionately concentrated in very small firms. Laeven and Woodruff examine the extent to which the distribution of firm size is related to the quality of the legal system using data from Mexico. They combine Lucas' (1978) model of firm size with Himmelberg, Hubbard, and Love's (2001) consideration of idiosyncratic risk in a framework in which the distribution of entrepreneurial talent and aversion to idiosyncratic risk combine to determine the optimal size of firms. Their data allows them to focus on the differential impact of the legal system on proprietorships and corporations. Moreover, by focusing on firms in a single country, the data draw attention to the importance of variation in the administration of justice and the enforcement of legal verdicts. The authors find that Mexican states with more effective legal systems have larger firms. A one-standard deviation improvement in the quality of the legal system increases the average firm size by about 10-15 percent. The impact of the legal system is greatest in sectors in which proprietorships dominate. This pattern is consistent with better legal systems increasing the investment of firm owners by reducing the idiosyncratic risk they face. All of these findings are upheld when the authors instrument for institutional variables using the log of indigenous population in 1900 and the active presence of the drug trade in the state.This paper - a product of Financial Sector Operations and Policy Department - is part of a larger effort in the department to study the governance of firms.

Book Synopsis The Quality of the Legal System, Firm Ownership, and Firm Size by : Luc Laeven

Download or read book The Quality of the Legal System, Firm Ownership, and Firm Size written by Luc Laeven and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Employment in developing countries is disproportionately concentrated in very small firms. Laeven and Woodruff examine the extent to which the distribution of firm size is related to the quality of the legal system using data from Mexico. They combine Lucas' (1978) model of firm size with Himmelberg, Hubbard, and Love's (2001) consideration of idiosyncratic risk in a framework in which the distribution of entrepreneurial talent and aversion to idiosyncratic risk combine to determine the optimal size of firms. Their data allows them to focus on the differential impact of the legal system on proprietorships and corporations. Moreover, by focusing on firms in a single country, the data draw attention to the importance of variation in the administration of justice and the enforcement of legal verdicts. The authors find that Mexican states with more effective legal systems have larger firms. A one-standard deviation improvement in the quality of the legal system increases the average firm size by about 10-15 percent. The impact of the legal system is greatest in sectors in which proprietorships dominate. This pattern is consistent with better legal systems increasing the investment of firm owners by reducing the idiosyncratic risk they face. All of these findings are upheld when the authors instrument for institutional variables using the log of indigenous population in 1900 and the active presence of the drug trade in the state.This paper - a product of Financial Sector Operations and Policy Department - is part of a larger effort in the department to study the governance of firms.

Financial and Legal Constraints to Firm Growth

Author: Thorsten Beck

Publisher:

Published: 2002

Total Pages: 37

ISBN-13:

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Book Synopsis Financial and Legal Constraints to Firm Growth by : Thorsten Beck

Download or read book Financial and Legal Constraints to Firm Growth written by Thorsten Beck and published by . This book was released on 2002 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: