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Financial constraints and investment: assessing the impact of a World Bank credit program on small and medium enterprises in Sri Lanka

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  • Varouj A. Aivazian
  • Eric Santor

Abstract

This paper examines the investment behaviour of a sample of small, credit-constrained firms in Sri Lanka. Using a unique panel data set, we analyze and compare the activities of two groups of small firms distinguished by their differential access to financing; one group consists of firms with subsidized loans from the World Bank, while the other group consists of firms without such subsidies. The paper shows that the program led to higher levels of investment for financially constrained firms. However, the evidence is inconclusive on whether the program improved economic efficiency.

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  • Varouj A. Aivazian & Eric Santor, 2008. "Financial constraints and investment: assessing the impact of a World Bank credit program on small and medium enterprises in Sri Lanka," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 475-500, May.
    • Handle: RePEc:cje:issued:v:41:y:2008:i:2:p:475-500
    DOI: 10.1111/j.1540-5982.2008.00471.x
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    6. Rijkers, Bob & Ruggeri Laderchi, Caterina & Teal, Francis, 2010. "Who Benefits from Promoting Small Enterprises? Some Empirical Evidence from Ethiopia," World Development, Elsevier, vol. 38(4), pages 523-540, April.
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    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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