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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.

Suggested Citation

  • Fafchamps, Marcel & Schündeln, Matthias, 2013. "Local financial development and firm performance: Evidence from Morocco," Journal of Development Economics, Elsevier, vol. 103(C), pages 15-28.
    • Handle: RePEc:eee:deveco:v:103:y:2013:i:c:p:15-28
    DOI: 10.1016/j.jdeveco.2013.01.010
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    More about this item

    Keywords

    Manufacturing; Credit constraint; Firm size;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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