Search

Using a data set covering about 277,000 firms across 79 countries over the period 2004-11, this paper examines the evolution of firms capital structure during the global financial crisis and its aftermath in 2010-11. The study finds that firm leverage and debt maturity declined in advanced economies and developing countries, even in countries that did not experience a crisis. The deleveraging and maturity reduction were particularly significant for privately held firms, including small and medium enterprises. For small and medium-size enterprises, these effects were larger in countries with less efficient legal systems, weaker information-sharing mechanisms, shallower banking systems, and more restrictions on bank entry. In contrast, there is weaker evidence of a significant decline of leverage and debt maturity among firms listed on a stock exchange, which are typically much larger than other firms and likely benefit from the spare tire of easier access to capital market financing.

An international cooperative effort has been focused on the need to reduce financial fragility and systemic risks in global financial markets. Work is proceeding in three different areas: enhancing financial market transparency, improving the international financial architecture, and strengthening financial systems. Strengthening financial systems (the focus of this paper) means cooperating to promote principles and sound practices for financial stability through development of well-functioning financial systems and market discipline. Financial sector reform and development is much more than setting rules, articulating standards, approving legislation, and creating new institutions. All are important but ultimately behavior must be changed if there is to be meaningful and lasting financial reform. For that reason, this paper emphasizes the role of incentives to induce appropriate behavior. Developing countries have made important progress toward improved financial supervision in the past few years. Reforming financial sectors is a lengthy and complex process of institution building and incentive reorientation, whose success requires full ownership of, and participation in, the process by society and its government.

International audience; This article aims to demonstrate how useful the introduction of the entrepreneurial concept can be in completing the main theories of regional growth. Three bodies of literature are dealt with: the one derived from the neoclassical approach and renewed by the success of the New Economic Geography (NEG) those which commonly attached to radical heterodox thinking and, more particularly, the Keynesian view of regional development symbolized by economic base theory. The definition of the entrepreneur is quite broad and non -homogeneous as this concept has been studied for centuries by economists. In this article, we draw on the one given by some Austrian authors, such as Kirzner (1973). According to this vision, the entrepreneur is anactor who perceives opportunities for gain not already exploited by others. He is a political entrepreneur if he takes up opportunities on the political market. He is a merchant if he discovers commercial exchanges that are mutually profitable on the economic market. Such definition insists principally on the “alertness” of persons. Even if the above mentioned theories do not ignore this figure, it seems important to clarify the way they incorporate it into their respective reasoning.The orthodox approach of regional economics relies on the transposition of national macro-models to a smaller territorial scale. In this framework, regional growth is mainly explained through the achievement of productivity gains. Initially taken for granted, these productivity gains have been endogenized thanks to the introduction of new factors into the production function. Human capital, R&D activities or physical infrastructure generate externalities which do improve the productivity of labour and capital and thus enhance regional growth. Inspired from the new international trade theories, the NEG goes into detail and provides territorial support to these productive effects. Combined with transportation costs, agglomeration economies indeed allow economists to theorize productivity gains and to explain uneven spatial development. Although they have been academically praised, these models however ignore the concept of the entrepreneur. In order to remedy to this, Audretsch and Keilbach (2004) have completed the endogeneous growth model with a new variable: “entrepreneurship capital” (expressed by the rate of firm creation in the regional population). Their study focuses on German regions and is empirically tested. According to the authors, the entrepreneur is seen as a medium through which economic knowledge can be selected and diffused throughout the regional territory. Entrepreneurship capital” is therefore complementary to R&D activities and improves their productivity thanks to spill-over effects. This result is especially robust when tested for the NITC sectors. A conclusion can be drawn that the productive activities of entrepreneurs favour regional growth, a conclusion that the neoclassical models should seek to demonstrate more precisely.The heterodox corpus refers to a “patchwork ” of theories which commonly deny the view of an equilibrated economy. In regional science, these heterodox theories focus on two main issues: the productive development of territories and their mobilization as an economic resource. The first has been essentially studied by economists of the endogenous development school of thought (Piore and Sabel, 1984) and by the Californian School of Economic Geography (Scott, 2001). They highlight that the point that the territorial organization of economic activities into specialized industrial districts, because of the flexibility and proximity it allows, may offer a viable alternative to the concentration of large firms. Concerning the mobilization of the territory as a n economic resource, the Regulationist School (Kratke, 1997) insists on institutional arrangements that are produced by a given space and then characterize it. The growth differential between regions does not only provide their initial factors endowments but above all from the specificities of their systems of regulation. Even if these heterodox theories do not share the optimistic view of the market economy praised by Austrian authors, they nevertheless show many similarities. First, both theories agree not to take GDP as an indicator of territorial development. Second, they explain capitalism based on the same entity: the firm. As entrepreneurs perceive opportunities not already exploited on the market, they participate in territorial development and support the search for factor productivity gains. Above all, the heterodox and entrepreneurial theories seem to develop territorial themes in a very similar fashion. Entrepreneurs actions are indeed localized into a specific “cognitive space” n which agents share knowledge and networks of social relations (Ikeda, 2004). They can therefore be considered as captive by a territory which generates a specific institutional framework. Eonomic base theory can be seen as the Keynesian perspective of territorial development. It indeed stipulates that the regional trajectory does not depend on output but rather on income. Thus, the way regions succeed in attracting income from the “rest of the world” becomes critical, as is their ability to retain this income. A territory may generate an impressive GDP but suffer after that from an “invisible circulation of wealth” (Davezies, 2008). In the French case, economic base theory explains why “unproductive” territories actually may experience more favourable development than “productive” ones. Population aging, increased mobility and a “new” way of lifeare all factorsinadequately considered in neoclassical models; they play out through a multiplicative mechanism and increase regional demand in territories with residential amenities.Baumol (1990) and the Austrian theory of political entrepreneurship advocate a clear distinction between incomes derived from productive and those from unproductive activities. An agent may indeed have the choice between engaging oneself into profit or rent-seeking activities. Such a decision depends critically on incentives given by the institutional framework. Orienting individuals towards rent-seeking induces waste of resources and reduces potential economic growth. Economic base theory should therefore seek to separate more precisely incomes coming from merchant activities and based on exports from those dependent on public transfers. This distinction could highlight how unviable a territorial scheme is in which productive regions finance unproductive ones. By undermining the future growth of wealthy regions and giving individuals inappropriate incentives, such an institutional framework could ultimately lose out at the national scale.

This paper uses firm-level data from the Business Environment and Enterprise Performance Surveys to study the process of convergence of transition countries with developed market economies. The study focuses on competition and market structure, finance and the structure of lending to firms, and how firms respond to the economic environment by restructuring. The authors find substantial evidence of convergence in a number of dimensions. The pattern of growth at the country, sector, and firm levels shows rapid growth of the new private sector and of the micro and small-firm sectors, with the size distribution of firms moving toward the pattern observed in the surveys of developed market economies. In finance, increasing reliance on retained earnings in transition countries reflects a maturation of the sector as new firms come to rely less on informal and family sources of finance. The authors find evidence of an inverse-U pattern, with the peak of restructuring activity taking place in 2002, the middle of the period analyzed. Throughout, the regional patterns suggest greater convergence in the transition countries that joined the European Union in 2004 than in the other, lower-income transition economies.

More than regulations, laws on the books, or voluntary codes, enforcement is a key to creating an effective business environment and good corporate governance, at least in developing countries and transition economies. A framework is presented to help explain enforcement, the impact on corporate governance when rules are not enforced, and what can be done to improve corporate governance in weak enforcement environments. The limited empirical evidence suggests that private enforcement tools are often more effective than public tools. However, some public enforcement is necessary, and private enforcement mechanisms often require public laws to function. Private initiatives are often also taken under the threat of legislation or regulation, although in some countries bottom-up, private-led initiatives preceded and even shaped public laws. Concentrated ownership aligns incentives and encourages monitoring, but it weakens other corporate governance mechanisms and can impose significant costs. Various steps can be taken to reduce these costs and reinforce other corporate governance mechanisms. But political economy constraints, resulting from the intermingling of business and politics, often prevent improvements in the enforcement environment and the adoption and implementation of public laws.