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Access to Financing and Firm Growth: Evidence from Ethiopia

Author

Listed:
  • Dereje Regasa

    (Department of Accountancy and Finance, University of Otago, New Zealand)

  • David Fielding

    (Department of Economics, University of Otago, New Zealand)

  • Helen Roberts

    (Department of Economics, University of Otago, New Zealand)

Abstract

Using Ethiopian firm-level data, we model the effect of different types of financing on firm growth. The form of financing is potentially endogenous to firm growth, and one contribution of this paper is to introduce a new instrumental variable which captures local variation in financial depth. Unlike previous studies of firms in low-income countries, we find evidence for a negative relationship between the use of external finance and firm growth, which suggests that there are substantial cross-country differences in the finance-growth nexus. We discuss possible explanations for this phenomenon and its implications for development policy.

Suggested Citation

  • Dereje Regasa & David Fielding & Helen Roberts, 2017. "Access to Financing and Firm Growth: Evidence from Ethiopia," Working Papers 1707, University of Otago, Department of Economics, revised Apr 2017.
    • Handle: RePEc:otg:wpaper:1707
    as

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    File URL: http://www.otago.ac.nz/economics/otago642358.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mirgul Nizaeva & Ali Coskun, 2019. "Investigating the Relationship Between Financial Constraint and Growth of SMEs in South Eastern Europe," SAGE Open, , vol. 9(3), pages 21582440198, September.
    2. Quan Tran & Anh‐Tuan Doan & Thao Tran, 2021. "Small and medium enterprises' credit access, ownership structure and job development," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 710-735, December.

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    More about this item

    Keywords

    Ethiopia; firm growth; external financing;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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