Formal versus informal finance : evidence from China

China is often mentioned as a counterexample to the findings in the finance and growth literature since, despite the weaknesses in its banking system, it is one of the fastest growing economies in the world. The fast growth of Chinese private sector firms is taken as evidence that it is alternative financing and governance mechanisms that support China's growth. This paper takes a closer look at firm financing patterns and growth using a database of 2,400 Chinese firms. The authors find that a relatively small percentage of firms in the sample utilize formal bank finance with a much greater reliance on informal sources. However, the results suggest that despite its weaknesses, financing from the formal financial system is associated with faster firm growth, whereas fund raising from alternative channels is not. Using a selection model, the authors find no evidence that these results arise because of the selection of firms that have access to the formal financial system. Although firms report bank corruption, there is no evidence that it significantly affects the allocation of credit or the performance of firms that receive the credit. The findings suggest that the role of reputation and relationship based financing and governance mechanisms in financing the fastest growing firms in China is likely to be overestimated.Access to Finance,Banks&Banking Reform,,Debt Markets,Bankruptcy and Resolution of Financial Distress

Firm innovation in emerging markets : the roles of governance and finance

The authors investigate the determinants of firm innovation in over 19,000 firms across 47 developing economies. They define the innovation process broadly, to include not only core innovation such as the introduction of new products and new technologies, but also other types of activities that promote knowledge transfers and adapt production processes. The authors find that more innovative firms are large exporting firms characterized by private ownership, highly educated managers with mid-level managerial experience, and access to external finance. In contrast, firms that do not innovate much are typically state-owned firms without foreign competitors. The identity of the controlling shareholder seems to be particularly important for core innovation, with those private firms whose controlling shareholder is a financial institution being the least innovative. While the use of external finance is associated with greater innovation by all private firms, it does not make state-owned firms more innovative. Financing from foreign banks is associated with higher levels of innovation compared with financing from domestic banks.Education for Development (superceded),Microfinance,Small Scale Enterprise,Investment and Investment Climate,Innovation

Do Phoenix miracles exist ? firm-level evidence from financial crises

This paper provides empirical evidence on firm recoveries from financial system collapses in developing countries (systemic sudden stops episodes), and compares them with the experience in the United States in the 2008 financial crisis. Prior research found that economies recover from systemic sudden stop episodes before the financial sector. These recoveries are called Phoenix miracles, and the research questioned the role of the financial system in recovery. Although an average of the macro data across a sample of systemic sudden stop episodes over the 1990s appears consistent with the notion of Phoenix recoveries, closer inspection reveals heterogeneity of responses across the countries, with only a few countries fitting the pattern. Micro data show that across countries, only a small fraction (less than 31 percent) of firms follow a pattern of recovery in sales without a recovery in external credit, and even these firms have access to external sources of cash. The experience of firms in the United States during the 2008 financial crisis also suggests no evidence of credit-less recoveries. An examination of the dynamics of firms'financing, investment and payout policies during recovery periods shows that far from being constrained, the firms in the sample are able to access long-term financing, issue equity, and significantly expand their cash holdings.Debt Markets,Access to Finance,Bankruptcy and Resolution of Financial Distress,Emerging Markets,Economic Theory&Research

Are innovating firms victims or perpetrators ? tax evasion, bribe payments, and the role of external finance in developing countries

This paper investigates corruption and tax evasion and their firm-level determinants across 25,000 firms in 57 countries, a large fraction of which are small and medium enterprises in developing countries. Firms that pay more bribes also evade more taxes. Corruption acts as a tax oninnovation, particularly that of small and young firms. Innovating firms pay a larger percentage of their revenues in bribes to government officials than non-innovating firms. They do not, however, pay more protection money to private parties than other firms. Comparing the magnitudes of bribes and taxes evaded, innovating firms and firms that use formal finance are more likely to be net victims. The findings point to the challenges facing innovators in developing countries and the role of banks in curbing corruption and tax evasion.Access to Finance,Taxation&Subsidies,Public Sector Corruption&Anticorruption Measures,Debt Markets,Public Sector Economics

What and Why of Technostress: Technology Antecedents and Implications

The Bureau of Labor Statistics (2002) reports that, on average, individuals worked seven hours per week from home in addition to regular work hours. This is made possible by advances in information and communication technologies (ICTs). While the increasing workload is not unusual, it has been related to stress, including the relatively new phenomenon of stress induced by technologies (technostress). Academic literature, popular press and anecdotal evidence suggest that ICTs are responsible for increased stress levels in individuals. However, it is not very clear as to how or why ICTs create stress. Prior research on technostress has been largely descriptive. As ICTs become ubiquitous, their stressful impact can be felt at all levels of an organization. Stress related health costs are increasing dramatically and there is evidence of decreased productivity in stressed individuals (Chilton et al., 2005; Cooper et al., 2001; Jex, 1998). So, organizations have incentives to better understand stressful situations at workplace. Based on the literature from management information systems, psychology, organizational behavior, and occupational stress, a model of technostress is developed to address the question of \u27how and why information and communication technologies enable stress in individuals\u27. Person-Environment fit model (Edwards, 1996) is used as a theoretical lens to explain technostress. The research model proposes that certain technology characteristics exacerbate stressors identified in occupational stress literature leading to the manifestation of stress, referred to as strain. Specifically, technology characteristics - usability (usefulness, complexity, and reliability), intrusive (presenteeism, anonymity), and dynamic (pace of change) are proposed to be related to stressors (work overload, role ambiguity, invasion of privacy, work-home conflict, and job insecurity). Survey design methodology is used to test the proposed research model. Field data for 692 working professionals was obtained from a market research firm (Zoomerang®). In general, the results from structural equation modeling supported the hypotheses from the model. The results suggest that technostress is prevalent (and a significant predictor of overall job strain). Specifically, work overload and role ambiguity are found to be the two most dominant stressors, whereas intrusive technology characteristics are found to be the dominant predictors of stressors. The results from this study have implications for both research and practice. It opens up new avenues for research by showing that ICTs are a source of stress - thereby addressing calls to understand the stressful impacts of ICTs (Nelson, 1990; Weber, 2004). To our knowledge, it is the first empirical study to address the phenomenon of technostress that is theoretically grounded in stress research. The implications of present research to other research streams such as resistance to technologies, value of technology investments are also highlighted. Based on research findings, this research proposes certain recommendations that can influence managerial action. Foremost among these, it brings attention to presence of technostress in organizations and also provides a framework which can be used to assess the extent to which technostress is prevalent

Small and medium enterprises across the globe : a new database

This paper describes a new cross-country database on the importance of small and medium enterprises (SMEs). This database is unique in that it presents consistent and comparable information on the contribution of the SME sector to total employment and GDP across different countries. The dataset improves on existing publicly available datasets on several grounds. First, it extends coverage to a broader set of developing and industrial economies. Second, it provides information on the contribution of the SME sector using a uniform definition of SMEs across different countries, allowing for consistent cross-country comparisons. Third, while we follow the traditional definition of the SME sector as being part of the formal sector, the new database also includes the size of the SME sector relative to the informal sector. This paper describes the sources and the construction of the different indicators, presents descriptive statistics, and explores correlations with other socioeconomic variables.Small Scale Enterprise,Small and Medium Size Enterprises,Environmental Economics&Policies,Microfinance,Economic Theory&Research,Small Scale Enterprise,Microfinance,Environmental Economics&Policies,Small and Medium Size Enterprises,Private Participation in Infrastructure

Throughput Analysis of Primary and Secondary Networks in a Shared IEEE 802.11 System

In this paper, we analyze the coexistence of a primary and a secondary (cognitive) network when both networks use the IEEE 802.11 based distributed coordination function for medium access control. Specifically, we consider the problem of channel capture by a secondary network that uses spectrum sensing to determine the availability of the channel, and its impact on the primary throughput. We integrate the notion of transmission slots in Bianchi's Markov model with the physical time slots, to derive the transmission probability of the secondary network as a function of its scan duration. This is used to obtain analytical expressions for the throughput achievable by the primary and secondary networks. Our analysis considers both saturated and unsaturated networks. By performing a numerical search, the secondary network parameters are selected to maximize its throughput for a given level of protection of the primary network throughput. The theoretical expressions are validated using extensive simulations carried out in the Network Simulator 2. Our results provide critical insights into the performance and robustness of different schemes for medium access by the secondary network. In particular, we find that the channel captures by the secondary network does not significantly impact the primary throughput, and that simply increasing the secondary contention window size is only marginally inferior to silent-period based methods in terms of its throughput performance.Comment: To appear in IEEE Transactions on Wireless Communication