Financial and Legal Constraints to Growth: Does Firm Size Matter?
Open accessAbstract
Using a unique firm‐level survey database covering 54 countries, we investigate the effect of financial, legal, and corruption problems on firms' growth rates. Whether these factors constrain growth depends on firm size. It is consistently the smallest firms that are most constrained. Financial and institutional development weakens the constraining effects of financial, legal, and corruption obstacles and it is again the small firms that benefit the most. There is only a weak relation between firms' perception of the quality of the courts in their country and firm growth. We also provide evidence that the corruption of bank officials constrains firm growth.
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Financial development loosens the growth-constraining effects of institutional defects and corruption on firm growth.
“Furthermore, financial development loosens the growth-constraining effects of institutional defects and corruption on firm growth.”
From Finance, Growth, and Inequality (2021) · cites this paper as Beck, Demirguc-Kunt, and Maksimovic (2005)
The Abstract says financial and institutional development weaken the growth-constraining effects of financial, legal, and corruption obstacles. But the results in “Firm Growth and Obstacles: Impact of Institutional Development” pair financial development with financing obstacles, legal development with legal obstacles, and lower corruption with corruption obstacles. They do not establish that financial development alone loosens the growth effects of legal defects and corruption. (LLM, conf=0.84)
Experimental — accuracy not yet measuredFinancing constraints exert a first-order impact on firm growth, especially on the ability of smaller firms to grow.
“They find that financing constraints exert a firstorder impact on firm growth, especially on the ability of smaller firms to grow.”
From Finance, Growth, and Inequality (2021) · cites this paper as Beck, Demirguc-Kunt, and Maksimovic (2005)
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Cites
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Chapter 12 Finance and Growth: Theory and Evidence
Levine, R. (2005) · Handbook of Economic Growth · doi:10.1016/s1574-0684(05)01012-9 · Cited by 2,889 · see citing works
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Law, S. H., & Singh, N. (2014) · Journal of Banking & Finance · doi:10.1016/j.jbankfin.2013.12.020 · Cited by 789 · see citing works
Who creates jobs in developing countries?
Ayyagari, M., Demirguc-Kunt, A., & Maksimovic, V. (2014) · Small Business Economics · doi:10.1007/s11187-014-9549-5 · Cited by 300 · see citing works
Self-citationAsante, G. N., Takyi, P. O., & Mensah, G. (2023) · Development Studies Research · doi:10.1080/21665095.2022.2156904 · Cited by 72 · see citing works
“…high population growth rate, low life expectancy, poor human capital development and low level of investment, others (Aluko and Ibrahim 2020; Beck et al., 2005; Bordo and Rousseau 2006; E ffi ong 2015; Harper and McNulty 2008; Sghaier, 2018; Kutan, Samargandi, and Sohag 2017) also argue…”
BackgroundFinance, Growth, and Inequality
Levine, R. (2021) · IMF Working Papers · doi:10.5089/9781513583365.001 · Cited by 62 · see citing works
Siddiki, J., & Bala-Keffi, L. R. (2024) · Economic Modelling · doi:10.1016/j.econmod.2024.106707 · Cited by 41 · see citing works
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Nguyen, L. T., Su, J.-J., & Sharma, P. (2019) · Applied Economics · doi:10.1080/00036846.2019.1569196 · Cited by 27 · see citing works
- Authors
- BECK, T., DEMIRGÜÇ‐KUNT, A., & MAKSIMOVIC, V.
- Affiliations
- World Bank (US)
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2005-02
- Volume
- 60
- Issue
- 1
- Pages
- 137-177
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2032305868
- Cited by
- 2,557
- References
- 1
- Citations by year
- 2026: 243 · 2025: 231 · 2024: 147 · 2023: 121 · 2022: 137 · 2021: 125 · 2020: 117 · 2019: 144 · 2018: 112 · 2017: 127 · 2016: 140 · 2015: 130 · 2014: 140 · 2013: 120 · 2012: 109
- FWCI
- 198.19
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- The Journal of Finance (publishedVersion)
- Topics
- Social Sciences › Sociology and Political Science › Corruption and Economic Development
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Firm Innovation and Growth
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Keywords
- business growth, firm size, financial constraints, legal constraints, corruption, institutional development, small business, bank employees, cross-national comparison
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