The Persistence of Limited Access to Finance
|Author||Michael Victor G. Ong|
|Keywords||Institutions Firm Performance Access to Finance MSMEs thePhilippines|
Using micro data obtained from an enterprise survey of1,326firm respondents conducted by the World Bank-Enterprise Analysis Unit (EAU) in2009for the Philippines, regression analysis is employed to determine the relationships of perceived institutional business factors that affect firms in said country. Firm performance measures (Real Annual Sales Growth-ASGA Annual Employment Growth-AEG, Annual Labor Productivity Growth-ALPGG and Capacity Utilization-CAPUTILITY) computed from the data are used as dependent variables against fifteen pro forma obstacles-to-business indicators. Using the institutional theoretical framework of Douglass C. North, these indicators are treated as institutional factors that influence firm performance. Using the OLS estimation method, regression results have identified several of such institutional factors utilized as explanatory variables as being significantly correlated to firm performance measures. Results yielded access to finance as the perennial and pivotal institutional factor that relates to firm performance. A review of the related literature and its findings match this outcome. Access to finance is then used as a dependent variable in a regression analysis against firm-level financial characteristics to probe into significant determinants of financial access. This empirical research concludes that Philippine firms, in particular MSMEs, persistently face limited access to finance as the top institutional constraint in doing business. Empirical research results validate the theoretical extrapolation on the nexus between institutional business factors and firm performance.