Financial and Legal Institutions and Firm Size

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.

Bibliographic Details

Main Authors:	Maksimovic, Vojislav, Beck, Thorsten, Demirguc-Kunt, Asli
Language:	English en_US
Published:	World Bank, Washington, DC 2003-03
Subjects:	ACCOUNTING, ADVERSE SELECTION, AGENCY PROBLEMS, ASSETS, BANK CREDIT, BANK MONITORING, BANKING SECTOR, BANKING SECTOR DEVELOPMENT, BANKING SYSTEM, BANKING SYSTEMS, BANKRUPTCY, BANKS, BENCHMARK, CAPITAL MARKETS, CAPITALIZATION, COMMERCIAL BANKS, COMPARATIVE ADVANTAGE, CONGLOMERATES, CONTRACT ENFORCEMENT, CORPORATE FINANCE, CORPORATION, CORPORATIONS, DISEQUILIBRIUM, DIVERSIFICATION, DIVIDEND POLICY, ECONOMIES OF SCALE, ENTREPRENEURS, EQUILIBRIUM, EXPORTS, FINANCIAL INSTITUTIONS, FINANCIAL PLANNING, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL STRUCTURE, FINANCIAL SYSTEMS, FIRM SIZE, FIRMS, GDP, GDP PER CAPITA, GROSS DOMESTIC PRODUCT, GROSS DOMESTIC PRODUCT PER CAPITA, GROWTH RATE, HUMAN CAPITAL, INEFFICIENCY, INFLATION, INFLATION RATE, INSTITUTIONAL DEVELOPMENT, LAWS, LEGAL PROTECTION, MEDIUM ENTERPRISES, NATIONAL INCOME, NET SALES, OLIGOPOLY, OPEN ECONOMIES, OPPORTUNITY COSTS, ORGANIZATIONAL CAPITAL, PER CAPITA INCOMES, PRIVATE BANKS, PRODUCTIVITY, PROFIT RATE, PROFITABILITY, REAL GDP, REORGANIZATION, RESOURCE ALLOCATION, RETURN ON ASSETS, SIZE OF FIRMS, SMALL FIRMS, TOTAL OUTPUT, WAGES, WEALTH FINANCIAL INSTITUTIONS, LEGAL FRAMEWORK, INDUSTRIAL CAPACITY, LEGAL & REGULATORY FRAMEWORK, EXTERNAL FINANCE, CREDITOR COUNTRIES, CAPITAL INVESTMENTS, PROTECTION SYSTEMS,
Online Access:	http://documents.worldbank.org/curated/en/2003/03/2181644/financial-legal-institutions-firm-size https://hdl.handle.net/10986/19157
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