Financial and Legal Institutions and Firm Size

[摘要] The authors investigate how acountry's financial institutions and the quality of itslegal system explain the size attained by its largestindustrial firms in a sample of 44 countries. Firm size ispositively related to the size of the banking system and theefficiency of the legal system. Thus, the authors find noevidence that firms are larger in order to internalize thefunctions of the banking system or to compensate for thegeneral inefficiency of the legal system. But they do findevidence that externally financed firms are smaller incountries that have strong creditor rights and efficientlegal systems. This suggests that firms in countries withweak creditor protections are larger in order to internalizethe protection of capital investment.

[发布机构] World Bank, Washington, DC

[学科分类] 社会科学、人文和艺术（综合）

[关键词] ACCOUNTING;ADVERSE SELECTION;AGENCY PROBLEMS;ASSETS;BANK CREDIT