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Sources of Financing and Firm Growth: Evidence from Ethiopia

Author

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  • Dereje Regasa
  • David Fielding
  • Helen Roberts

Abstract

Using Ethiopian firm-level data, we model the effect of different types of financing on firm growth. The form of financing is potentially endogenous to firm growth, and one contribution of this paper is to introduce a new instrumental variable which captures local variation in financial depth. Unlike previous studies of firms in low-income countries, we find evidence for a negative relationship between the use of external finance and the firm growth, which suggests that there are substantial cross-country differences in the finance-growth nexus. We discuss possible explanations for this phenomenon and its implications for development policy.

Suggested Citation

  • Dereje Regasa & David Fielding & Helen Roberts, 2020. "Sources of Financing and Firm Growth: Evidence from Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 29(1), pages 26-45.
    • Handle: RePEc:oup:jafrec:v:29:y:2020:i:1:p:26-45.
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    File URL: http://hdl.handle.net/10.1093/jae/ejz012
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    Cited by:

    1. Iman Cheratian & Saleh Goltabar & Hassan Gholipour Fereidouni & Mohammad Reza Farzanegan, 2023. "External Financing and Firm Growth: Evidence from Micro, Small, and Medium Enterprises in Iran," MAGKS Papers on Economics 202308, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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