Business environment and the incorporation decision

By Asli Demirgüç-Kunt, Inessa Love, Vojislav Maksimovic. 2004

221 citations recorded by the source corpus.

Using firm-level data from 52 countries, the authors investigate how a country's institutions and business environment affect firms' organizational choices and the effects of organizational form on access to finance and growth. They find that businesses are more likely to choose the corporate form in countries with developed financial sectors and efficient legal systems, strong shareholder and creditor rights, low regulatory burdens and corporate taxes, and efficient bankruptcy processes. Corporations report fewer financing, legal, and regulatory obstacles than unincorporated firms, and this advantage is greater in countries with more developed institutions and favorable business environments. The authors find some evidence of higher growth of incorporated businesses in countries with good financial and legal institutions.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/4d76fb0831da93a33412951abfe8930d957ff6e0

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Citations in the corpus

Shock-Based Causal Inference in Corporate Finance and Accounting Research (2015, unknown): “On the latter choice, see Demirguc-Kunt et al. (2006).”
Size matters: entrepreneurial entry and government (2012, methodology): “12 Demirguc-Kunt et al. (2006) also focus on incorporated firms, but adopt a different methodology and use a different dataset. Instead of looking at industry averages, they combine country level institutional explanatory variables with firm-level data from the World Business Environment Survey. Dis”
Corporate Governance and Performance around the World : What We Know and What We Don't (2011, background): “If all firms choose the best form of governance, no empirical relationship will be observed between firm value and governance (see also Demsetz and Lehn 1985).”
Board Diversity and Corporate Social Disclosure: Evidence from Vietnam (2016, background): “This is done on the basis that prior research concludes that governance structures probably develop endogeneity depending on firm-specific characteristics and the unique business environment in a particular country (Demirguc-Kunt et al. 2006; Haniffa and Hudaib 2006; Love 2011).”