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Local financial development and firm performance: Evidence from Morocco

  • Fafchamps, Marcel
  • Schündeln, Matthias

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  7. 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.
  8. Antonio Ciccone & Elias Papaioannou, 2010. "Estimating cross-industry cross-country models using benchmark industry characteristics," Economics Working Papers 1235, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. 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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