Entrepreneurial Finance Around The World: The Impact Of The Business Environment On Financing Constraints

In this paper, the authors use a unique dataset of over 70,000 firms, most of which are small, in over 100 countries, to systematically study the use of different financing sources for new and young firms. As expected, they find that in all countries younger firms have significantly less reliance on bank financing and more reliance on informal financing. However, they also find that younger firms have better access to bank finance in countries with stronger rule of law and better credit information, and that the reliance of young firms on operations finance (i.e., leasing and trade credit) and informal finance decreases with the availability of credit information.