Credit-constrained in Risky Activities? The Determinants of the Capital Stocks of Micro and Small Firms in Western Africa
Micro and small enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why the capital stocks of MSEs remain low. This article analyzes the determinants of the capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross ]sectional but backward ]looking, micro data set on MSEs covering the economic capitals of seven West ]African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role in capital accumulation. Risk ]averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over ]invest when they start their business and subsequently adjust capital stocks downwards. As other firms simultaneously suffer from capital shortages, such behaviour may imply large inefficiencies.
|Date of creation:||Jan 2012|
|Contact details of provider:|| Postal: Neuer Jungfernstieg 21, D-20354 Hamburg|
Phone: +49 (0)40 42825-593
Fax: +49 (0)40 42825-547
Web page: http://www.giga-hamburg.de/workingpapers
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guariglia, Alessandra & Liu, Xiaoxuan & Song, Lina, 2011.
"Internal finance and growth: Microeconometric evidence on Chinese firms,"
Journal of Development Economics,
Elsevier, vol. 96(1), pages 79-94, September.
- Alessandra Guariglia & Xiaoxuan Liu & Lina Song, "undated". "Internal Finance and Growth: Microeconometric Evidence on Chinese Firms," Discussion Papers 08/37, University of Nottingham, GEP.
- Guariglia, Alessandra & Liu, Xiaoxuan & Song, Lina, 2008. "Internal Finance and Growth: Microeconometric Evidence on Chinese Firms," IZA Discussion Papers 3808, Institute for the Study of Labor (IZA).
- Alessandra Guariglia & Xiaoxuan Liu & Lina Song, "undated". "Internal Finance and Growth: Microeconometric Evidence on Chinese Firms," Discussion Papers 09/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
- John Hutchinson & Ana Xavier, 2006. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," Small Business Economics, Springer, vol. 27(2), pages 169-179, October.
- John Hutchinson & Ana Xavier, 2004. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," LICOS Discussion Papers 15004, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
When requesting a correction, please mention this item's handle: RePEc:gig:wpaper:185. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bert Hoffmann)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.