Access to Financing and Firm Growth: Evidence from Ethiopia

Regasa, Dereje; Roberts, Helen; Fielding, David

Access to Financing and Firm Growth: Evidence from Ethiopia

Regasa, Dereje; Fielding, David; Roberts, Helen

Cite this item: Regasa, D., Fielding, D., & Roberts, H. (2017). Access to Financing and Firm Growth: Evidence from Ethiopia (Economics Discussion Papers Series No. 1707). University of Otago. Retrieved from http://hdl.handle.net/10523/7267

Permanent link to OUR Archive version: http://hdl.handle.net/10523/7267

Date: 2017-04

Publisher: University of Otago

Series: Economics Discussion Papers Series

Series number: 1707

ISSN: 1178-2293

Keywords: Ethiopia; firm growth; external financing

Research Type: Discussion Paper

Languages: English

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.

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