Determinants of Informal Credit Use: A Cross Country Study

Posted: 17 Sep 2011 Last revised: 9 Jun 2012

See all articles by Elmas Yaldiz

Elmas Yaldiz

University of Trento

Yener Altunbas

University of Wales, Bangor

Flavio Bazzana

University of Trento

Date Written: September 16, 2011

Abstract

The aim of this paper is to understand why firms choose to finance their fixed asset investments by informal credit. We examine the both country and firm level determinants of this choice in a cross-country setting. Data on informal credit use of firms is extracted from the Business Environment and Enterprise Performance Surveys which enable us to study with a wider data compared to the previous studies. Our results address financial constraints as the source of informal credit use. Moreover firm size, owners’ gender and location are important firm level factors affecting firms’ reliance on informal credit. Finally financial development level in the country has significant impacts on decreasing the informal credit use.

Keywords: informal finance, financial constraints, financial exclusion

JEL Classification: O17

Suggested Citation

Yaldiz, Elmas and Altunbas, Yener and Bazzana, Flavio, Determinants of Informal Credit Use: A Cross Country Study (September 16, 2011). Midwest Finance Association 2012 Annual Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1928812 or http://dx.doi.org/10.2139/ssrn.1928812

Elmas Yaldiz (Contact Author)

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38122
Italy

Yener Altunbas

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

Flavio Bazzana

University of Trento ( email )

Via Inama 5
Trento, Trento 38122
Italy

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