The Impact of the Business Environment On Young Firm Financing [electronic resource] / Love, Inessa
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TextPublication details: Washington, D.C., The World Bank, 2010Description: 1 online resource (39 p.)Subject(s): Access to external finance | Access to Finance | Access to formal finance | Availability of credit | Bank financing | Bankruptcy and Resolution of Financial Distress | Banks & Banking Reform | Credit information | Debt Markets | Earnings | Economic development | Entrepreneur | Entrepreneurial Finance | Entrepreneurs | Finance and Financial Sector Development | Financial development | Financial Intermediation | Growth opportunities | Informal finance | Informal financing | Internal funds | International Bank | Investment opportunities | New business | Profitability | Small businessesAdditional physical formats: Love, Inessa.: The Impact of the Business Environment On Young Firm Financing.Online resources: Click here to access online Abstract: This paper uses a dataset of more than 70,000 firms in over 100 countries to systematically study the use of different financing sources for new and young firms, in comparison to mature firms. The authors find that in all countries younger firms rely less on bank financing and more on informal financing. However, they also find that younger firms use more bank finance in countries with stronger rule of law and better credit information, and that the reliance of young firms on informal finance decreases with the availability of credit information. Overall, the results suggest that improvements to the legal environment and availability of credit information are disproportionately beneficial for promoting access to formal finance by young firms.
This paper uses a dataset of more than 70,000 firms in over 100 countries to systematically study the use of different financing sources for new and young firms, in comparison to mature firms. The authors find that in all countries younger firms rely less on bank financing and more on informal financing. However, they also find that younger firms use more bank finance in countries with stronger rule of law and better credit information, and that the reliance of young firms on informal finance decreases with the availability of credit information. Overall, the results suggest that improvements to the legal environment and availability of credit information are disproportionately beneficial for promoting access to formal finance by young firms.
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