Financing Constraints Determinants in African Countries

Survey of data on a sample of 1559 firms is used from 16 African countries taken from the World Business Environment Survey (WBES) to assess how successful a priori classifications are in distinguishing between financially constrained and unconstrained firms and more generally, the determinants of financing obstacles of firms. We find that large and foreign-owned firms report less financing obstacles. Our findings confirm the usefulness of size and ownership as a priori classifications of financing constraints, while they shed doubts on other classifications used in the literature. The results achieved also show that institutional development is the most important country characteristic explaining cross-country variation in firms’ financing obstacles. This is both in small and medium enterprises. We use the ordered probit model to estimate all the regression models.