Click here for search results
The role of long term finance : theory and evidence, Volume 1
Author:Caprio Jr., Gerard; Demirguc-Kunt, Asli; Date Stored:2001/04/21
Document Date:1997/04/30Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; Payment Systems & Infrastructure; Economic Theory & Research; Banks & Banking Reform; Strategic Debt Management; Financial IntermediationLanguage:English
Major Sector:(Historic)Private Sector DevelopmentReport Number:WPS1746
Sub Sectors:Business EnvironmentCollection Title:Policy, Research working paper ; no. WPS 1746
Volume No:1  

Summary: The authors review the literature on term finance to place the research in context and discuss its implications for World Bank operations. Their project investigated whether industrial firms in developing countries suffer from a shortage of long-term credit and whether that shortage affects the firm's investment, productivity, and growth. Both issues are important in designing the World Bank's industrial lending policy because the development community is reevaluating mechanisms to make more term finance available or to lessen the constraints imposed by its absence. Using both cross-country empirical analysis and country case studies, researchers found that developing country firms use significantly less long-term debt than their industrial country counterparts, even after controlling for firm characteristics. They explain the difference in debt composition of industrial and developing countries in terms of firm characteristics, macro factors, and -most important- government subsidies, the country's level of financial development, and legal and institutional factors. They conclude that more long-term finance tends to be associated with higher productivity. Cross-country analysis of firm-level data also indicates that when there is an active stock market and when creditors and debtors are better able to enter into long-term contracts, firms seem to be able to grow faster than they could by relying only on internal resources and short-term credit. Another important finding: Government subsidies around the world have increased firms' long-term indebtedness, but there is no evidence connecting these subsidies with the firms's ability to grow faster. Indeed, in some cases subsidies were asociated with lower productivity.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 38 pagesOfficial version*2.66 (approx.)
TextText version**
How To Order
Light-Weight Documents
Lighter (less MB) documents which may or may not be the final, official version
File TypeDescriptionFile Size (mb)
PDF 31 pagesWPS17460.11

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: