1. Conference on Small and Medium Enterprises
Financial and Legal Institutions and Firm Size Thorsten Beck, Asli Demirgüç-Kunt and Vojislav Maksimovic
Discussion by
Reena Aggarwal
Conference on Small and Medium Enterprises
October 14-15, 2004
World Bank, MC 4-800

2. ISSUE Relationship Between Firm Size and
Legal System/Financial Institutions
Positive Relationship: Larger firms are
more complex, difficult to monitor/control,
Need to control for expropriation by
insiders
2) Negative Relationship: Larger firms can serve as internal markets and more effective in resource mobilization

3. RESULTS
Positive relationship between firm size and legal system/financial institutions
Legal system/financial institutions foster larger firms by allowing better access to finance and more effective capital allocation

4. COMMENTS 1) Firm-Level Analysis
Why have you left out firm-level variables?
Is it “largeness” alone or is it factors like concentration and float?
Why not interaction of country and firm
rather than just country and industry?

5. COMMENTS 2) Global Access to Capital
Large firms – “able to choose their boundaries and determine their size without constraint”
What about global access to capital?
Pakistan (68 firms) versus Mexico (52 firms) but Pakistan has 5 ADRs and Mexico has more than 40.

6. COMMENTS 2) Global Access to Capital Other forms of monitoring
Siegel, 2004

7. CONCLUSION INTERESTING ISSUE NICELY EXECUTED PAPER CLEAR RESULTS
ROBUSTNESS CHECKS