This chapter reviews and synthesizes theoretical and empirical research on the role of finance in developing countries. First, the paper presents the stylized facts about firms in developing nations as well as the legal, financial, and broader institutional framework in which these firms...

This paper investigates the contribution of small firms to employment, job creation, and growth in developing countries. While small firms (20 employees) have the smallest share of aggregate employment, the small and medium enterprise sector’s (100 employees) contribution is comparable to that...

The authors investigate how a country's financial institutions and the quality of its legal system explain the size attained by its largest industrial firms in a sample of 44 countries. Firm size is positively related to the size of the banking system and the efficiency of the legal system....

Using a unique firm-level survey data base, covering fifty four countries, the authors investigate whether different financial, legal, and corruptionissues that firms report as constraints, actually affect their growth rates. The results show that the extent to which these factors constrain a...

The authors explore the relationship between financial structure - the degree to which a financial system is market- or bank-based - and economicdevelopment. They use three methodologies: 1) The cross-country approach uses cross-country data to assess whether economies grow faster with market-...

The authors investigate whether firms'access to external financing, to fund growth differs between market-based, and bank-based financial systems. Using firm-level data for forty countries, they compute the proportion of firms in each country that relies on external finance, and examine how that...

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...

The authors empirically analyze the association between firm financing choices and the level of development of financial markets in 30 countries for the period 1980-91. For the whole sample, there is a statistically significant negative correlation between stock market development, as measured...

The authors argue that non-financial firms act as intermediaries, by channeling short-term funds from the financial institutions in an economy, to their best use. Non-financial firms act in this way because they may have a comparative advantage in exploiting informal means of ensuring that...

The authors focus on two issues. First they examine whether firms in different countries finance long-term and short term investment similarly. Second, they investigate whether differences in financial systems and legal institutions across countries are reflected in the ability of firms to grow...