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Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence

Beck, T., Pamuk, H. and Uras, B.R. (2017). Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence. Review of Development Economics, doi: 10.1111/rode.12300

Abstract

We use a novel enterprise survey to gauge the relationship between saving instruments and entrepreneurial reinvestment. We show that while most informal saving practices are not associated with a lower likelihood of reinvestment when compared with formal saving practices, there is a significantly lower association of saving within the household with the likelihood of reinvesting profits than other savings form, most importantly, formal saving forms. This result is robust to the model specification and controlling for a large array of variables including district-level fixed effects. We also provide empirical tests to address reverse causation and omitted variable concerns. Our work contributes to the debate on the implications of different saving instruments in developing countries and expands the entrepreneurial financing constraints literature by focusing on internal rather than external funding constraints.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Beck, T., Pamuk, H. & Uras, B.R. (2017). Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence. Review of Development Economics, which has been published in final form at https://dx.doi.org/10.1111/rode.12300. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: Entrepreneurial finance; savings; reinvestment; financial inclusion
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/16995
[img] Text - Accepted Version
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