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Local financial development and firm performance: Evidence from Morocco

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  • Fafchamps, Marcel
  • Schündeln, Matthias

Abstract

Combining data from the Moroccan census of manufacturing enterprises with information from a commune survey, we test whether firm expansion is affected by local financial development. Our findings are consistent with this hypothesis: local bank availability is robustly associated with faster growth for small and medium-size firms in sectors with growth opportunities, with a lower likelihood of firm exit and a higher likelihood of investment. Regarding the channel, the evidence suggests that, over the study period, access to credit was used by pre-existing Moroccan firms to mobilize investment funds, with some evidence that they were partly used towards reducing labor costs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 103 (2013)
Issue (Month): C ()
Pages: 15-28

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Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:15-28

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Manufacturing; Credit constraint; Firm size;

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  1. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
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  6. Robin Burgess & Rohini Pande, 2003. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 40, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  7. repec:fth:wobaco:1083 is not listed on IDEAS
  8. Raymond Fisman & Inessa Love, 2003. "Financial Dependence and Growth Revisited," NBER Working Papers 9582, National Bureau of Economic Research, Inc.
  9. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2002. "Does Local Financial Development Matter?," NBER Working Papers 8923, National Bureau of Economic Research, Inc.
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  12. Antonio Ciccone & Elias Papaioannou, 2010. "Estimating Cross-Industry Cross-Country Models Using Benchmark Industry Characteristics," Working Papers 504, Barcelona Graduate School of Economics.
  13. Rajeev Dehejia & Adriana Lleras-Muney, 2007. "Financial Development and Pathways of Growth: State Branching and Deposit Insurance Laws in the United States, 1900–1940," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 239-272.
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Cited by:
  1. Holger Breinlich & Gianmarco I.P. Ottaviano & Jonathan R.W. Temple, 2013. "Regional growth and regional decline," Economics Discussion Papers 729, University of Essex, Department of Economics.
  2. Bagayev, Igor & Najman, Boris, 2014. "Money to fill the gap? Local financial development and energy intensity in Europe and Central Asia," MPRA Paper 55193, University Library of Munich, Germany.

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