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Business Environment and the Incorporation Decision

  • Demirguc-Kunt, Asli
  • Love, Inessa
  • Maksimovic, Vojislav

Using firm-level data from 52 countries, the authors investigate how a country's institutions and business environment affect firms'organizational choices and the effects of organizational form on access to finance and growth. They find that businesses are more likely to choose the corporate form in countries with developed financial sectors and efficient legal systems, strong shareholder and creditor rights, low regulatory burdens and corporate taxes, and efficient bankruptcy processes. Corporations report fewer financing, legal, and regulatory obstacles than unincorporated firms, and this advantage is greater in countries with more developed institutions and favorable business environments. The authors find some evidence of highergrowth of incorporated businesses in countries with good financial and legal institutions.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3317.

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Date of creation: 01 May 2004
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Handle: RePEc:wbk:wbrwps:3317
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  15. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2000. "A New Database on the Structure and Development of the Financial Sector," World Bank Economic Review, World Bank Group, vol. 14(3), pages 597-605, September.
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  28. Alan Morrison & William Wilhelm, 2003. "Partnership Firms, Reputation and Human Capital," Economics Series Working Papers 2003-FE-02, University of Oxford, Department of Economics.
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