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BANK FINANCING AND FIRM GROWTH: EVIDENCE FROM TRANSITION ECONOMIES
Author(s) -
Ullah Barkat,
Wei Zuobao
Publication year - 2017
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12133
Subject(s) - endogeneity , economics , transition countries , finance , financial system , business , international economics , econometrics
We examine the relation between financing patterns and firm growth in transition economies. Using a survey data set covering more than 20,000 firms in 30 Eastern European and Central Asian countries from 2002 to 2014, we find that firms using formal bank finance grow faster than those financed by informal sources. Our results hold after controlling for firm characteristics, country economic development, and potential endogeneity. The effect of bank finance on firm growth is more pronounced in non‐OECD than OECD countries, indicating the overwhelming importance of bank finance in countries with less developed institutions.