Credit-Constrained in Risky Activities?

Grimm, Michael; Lange, Simon; Lay, Jann

Credit-Constrained in Risky Activities?

2012

Grimm, Michael | Lange, Simon | Lay, Jann

Micro and Small Enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why capital stocks of MSEs remain low. This article analyzes the determinants of capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross sectional but backward looking, micro data set on MSEs covering the economic capitals of seven West-African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role for capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and adjust capital stocks downwards subsequently. As other firms simultaneously suffer from capital shortages, such behavior may imply large inefficiencies.

Afficher plus [+]

Mots clés AGROVOC

accounts agricultural economics business associations capacity building capital market developing countries development economics diversification econometric models economic development economic growth economic policies economic statistics entrepreneur entrepreneurs equipment expenditure farmers fixed costs growth theory households human capital instrument insurance inventories liquidity marginal utility microcredit microenterprises opportunity costs profitability reinvestment savings small enterprises start-up taxis union value added

Informations bibliographiques

D'autres materias

Capital cost; Demographic characteristics; Household wealth; Endowments; Capital injection; Borrowing; Capital shortages; Price risk; Bank policy; Portfolio; Liquidity problems; Liquidity premium; Information asymmetries; Investing; Moral hazard; Micro enterprises; Entrepreneurial activities; Entrepreneurial activity; Financial means; Interest rate; Durable; Small business; Family finance; Self-employment; Lottery; Trade sector; Business owners; Access to credit; Durable goods; Enterprise performance; Capital accumulation; Small-scale entrepreneurs; Credit constraints; Capital constraints; Labor markets; Market failures; Micro-finance; Credit rationing; Group of firms; High interest rates; Inventory; Opportunity cost; Market interest rates; Lack of access; Capital stocks; Capital constraint; Bank credit; Risk premium; Safe asset; Rate of return; Holding; Transition economy; Marginal cost; Moneylenders; Cost of capital; Earnings; Price uncertainty; Production function; Marginal product; Transition country; Receipts; Formal banks; Insurance products; Credit markets; Risk aversion; Economic constraints; Market interest rate; Labor force survey; Trust fund; Excessive risk; Financial resources; Credit institutions; Business risks; Checks; Insurance market; Marginal utility of consumption; Risk perceptions; Purchasing power; Business activity; Loan; Developing country; Contractual obligations; External finance; Market failure; Political economy; Credit constraint; Information on investment; Internal finance; Micro-finance institutions; Degrees of risk; Liquidity constraint; Advanced economy; Money lenders; Expected value; Credit history; Gdp; Micro-credit; Job creation; Retained earnings; Barriers to entry; Labor market; Biases; Middle income countries; Level of risk; Purchasing power parity; Liquidity constraints; Capital markets; Market economy; Access to finance; Credit constrained firms; Business economics; Access to capital; Productive investment; Credit market; Information on entrepreneurs; Family loans; Capital stock; Income growth; Market constraints; Capital returns; Wealth; Sources of finance; Financial support; Female entrepreneurs; Rates of return; Trading; Risk-averse individuals; Advanced economies; Accumulation rate; Source of credit; Access to formal credit; Expected utility; Micro data; Dummy variables; Insurance markets; Business risk; Entry barriers; Expenditures; Liquid wealth; Dummy variable; Micro-enterprise; Capital costs; Capital requirements; Tax; Internal funds; Physical capital; Collateral; Business activities; Investment behavior

Langue

anglais

Sur AGRIS depuis: 2021-06-15

Format: AGRIS AP

Fournisseur de données

Cette notice bibliographique a été fournie par World Bank

Découvrez la collection de ce fournisseur de données dans AGRIS

Liens

http://hdl.handle.net/10986/26786

Consulter Google Scholar

Si vous remarquez des informations incorrectes dans cette référence bibliographique, veuillez nous contacter à l'adresse [email protected]

FAO AGRIS - Système international des sciences et technologies agricoles

Share

Credit-Constrained in Risky Activities?

2012

Mots clés AGROVOC

Informations bibliographiques