Bank Financing and Firm Growth: Evidence from Transition Economies

40 Pages Posted: 12 Mar 2016 Last revised: 31 Dec 2018

See all articles by Barkat Ullah

Barkat Ullah

Morgan State University

Zuobao Wei

University of Texas at El Paso

Date Written: December 22, 2017

Abstract

We examine the relation between financing patterns and firm growth in transition economies. Using a survey dataset covering over 20,000 firms in 30 Eastern European and Central Asian countries from 2002-2014, 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, as well as 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.

Keywords: Firm financing patterns, Bank financing, Informal financing, Firm growth, Transition economy, Institutional development

JEL Classification: G21, G30, O16, O17

Suggested Citation

Ullah, Barkat and Wei, Zuobao, Bank Financing and Firm Growth: Evidence from Transition Economies (December 22, 2017). Journal of Financial Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2746714 or http://dx.doi.org/10.2139/ssrn.2746714

Barkat Ullah (Contact Author)

Morgan State University ( email )

Baltimore, MD 21251
United States

Zuobao Wei

University of Texas at El Paso ( email )

500 W. University Ave.
El Paso, TX 79968
United States
915-747-5381 (Phone)
915-747-6282 (Fax)

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