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Does business networking boost firms’ external financing opportunities? Evidence from Central and Eastern Europe

Owolabi, Oluwarotimi and Pal, Sarmistha (2012) Does business networking boost firms’ external financing opportunities? Evidence from Central and Eastern Europe. Applied Financial Economics, 23 (5). pp. 415-432. ISSN 1466–4305

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Abstract

This article argues that networked firms are likely to have an advantage in securing bank finance in countries with weak legal and judicial institutions since it helps banks and other financial institutions to minimize the underlying agency costs of lending. An analysis of recent Business Environment and Enterprise Performance Survey (BEEPS) data from 15 Central and Eastern European (CEE) countries lends some support to this hypothesis. Even after controlling for other factors, firms affiliated to Business Associations (BA) are more likely to secure bank finance. Further, the importance of business networking is particularly evident among firms who borrow from private domestic banks, as these new banks attempt to minimize costs of adverse selection. There is also some confirmation that the significance of networking disappears with improvement in institutional quality.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Dr. Oluwarotimi Ayokunnu OWOLABI
Date Deposited: 18 Sep 2017 10:03
Last Modified: 18 Sep 2017 10:03
URI: http://eprints.covenantuniversity.edu.ng/id/eprint/9339

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