The Value of Business Networks in Emerging Economies: An Analysis of Firms' External Financing Opportunities
The paper argues that networked firms are likely to have an advantage in securing external finance in countries with weak legal and judicial institutions since it helps financial institutions to minimize the underlying agency costs of lending. An analysis of recent BEEPS data from fifteen Central and Eastern European (CEE) countries lends some support to this hypothesis. Even after controlling for other factors, firms affiliated to business associations are more likely to secure bank finance. Importance of being associated with business networks is particularly evident among firms who borrow from private domestic and foreign banks, as these new banks attempt to minimize costs of adverse selection. Networking however discriminates against the small and medium sized firms' access to bank loans in the CEE regions. Results are robust in both single cross-section and panel data analyses.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
| Length: | 48 pages |
| Date of creation: | May 2011 |
| Publication status: | published as 'Does business networking boost firms' external financing opportunities? Evidence from Central and Eastern Europe' in: Applied Financial Economics, 2013, 23 (5), 415-432 |
| Handle: | RePEc:iza:izadps:dp5738 |
| Contact details of provider: | Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany Phone: +49 228 3894 223 Fax: +49 228 3894 180 Web page: http://www.iza.org
|
| Order Information: | Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany 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.:
- Klapper, Leora & Sarria-Allende, Virginia & Sulla, Victor, 2002. "Small and medium size enterprise financing in Eastern Europe," Policy Research Working Paper Series 2933, The World Bank.
- Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004.
"Judicial Checks and Balances,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 445-470, April.
- Rafael LaPorta & Florencio Lopez-de-Silane & Cristian Pop-Eleches & Andrei Shleifer, 2003. "Judicial Checks and Balances," NBER Working Papers 9775, National Bureau of Economic Research, Inc.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Pop-Eleches, Cristian & Shleifer, Andrei, 2004. "Judicial Checks and Balances," Scholarly Articles 3451311, Harvard University Department of Economics.
- Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank.
- Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
- Berger, Allen N. & Klapper, Leora F. & Martinez Peria, Maria Soledad & Zaidi, Rida, 2008. "Bank ownership type and banking relationships," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 37-62, January.
- Berger, Allen N. & Klapper, Leora F. & Martinez Peria, Maria Soledad & Zaidi, Rida, 2006. "Bank ownership type and banking relationships," Policy Research Working Paper Series 3862, The World Bank.
- Detragiache, Enrica & Garella, Paolo & Guiso, Luigi, 1997. "Multiple Versus Single Banking Relationships," CEPR Discussion Papers 1649, C.E.P.R. Discussion Papers.
- De Haas, Ralph & Ferreira, Daniel & Taci, Anita, 2007. "What determines banks’ customer choice? Evidence from transition countries," MPRA Paper 6319, University Library of Munich, Germany. Full references (including those not matched with items on IDEAS)