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Which Institutions Are Important for Firms Performance? Evidence from Bayesian Model Averaging Analysis

Author

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  • Jarko Fidrmuc

    () (Corresponding author Henan University in Kaifeng, China; Zeppelin University in Friedrichshafen, Germany; Charles University in Prague, Institute of Economic Studies, Czech Republic; Kaunas University of Technology, Lithuania)

  • Svatopluk Kapounek

    () (Mendel University in Brno, Czech Republic; Kaunas University of Technology, Lithuania)

  • Martin Siddiqui

    () (Zeppelin University in Friedrichshafen, Germany)

Abstract

Using a rich dataset on individual firms in selected EU countries between 2005 and 2012, we document a surprisingly high share of assets tied in highly inefficient firms. Moreover, we discuss different channels through which institutions may affect firm financial developments and thus the long-run growth. Using Bayesian model averaging analysis, we discuss the importance of different types of economic, financial and political institutions. We show that high institutional quality improves the financial conditions of firms. However, too lax business regulations may worsen firms’ performance possibly due to excessive risk taking behavior.

Suggested Citation

  • Jarko Fidrmuc & Svatopluk Kapounek & Martin Siddiqui, 2017. "Which Institutions Are Important for Firms Performance? Evidence from Bayesian Model Averaging Analysis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(4), pages 383-400, September.
  • Handle: RePEc:voj:journl:v:64:y:2017:i:4:p:383-400
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    References listed on IDEAS

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    Cited by:

    1. Svatopluk Kapounek, 2017. "The Impact of Institutional Quality on Bank Lending Activity: Evidence from Bayesian Model Averaging," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(5), pages 372-395, October.

    More about this item

    Keywords

    : Institutional quality; Insolvency; Inefficient firms; Bayesian model averaging;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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