Contribution of banking and stock market development on the prospects of new business
DOI:
https://doi.org/10.23925/2179-3565.2023v14i2p88-105Keywords:
Moderator Model, Entrepreneurship Development, Stock Markets, Banking SectorAbstract
The relationship between entrepreneurship and financial development is essential for economic growth and stability of a country. The success of entrepreneurship is heavily influenced by the financial sector development as the financial sector provides a platform for companies to raise capital and obtain funding for expansion and progress. Therefore, the main objective of the current study is to explore the effects of financial sector development on the entrepreneurship progress. The data is collected from minimum 53 countries based on available data and analyzed by using Panel Feasible Generalized Least Squares (FGLS) regression method. The results show a positive association between entrepreneurial intentions and entrepreneurship development in the presence of banking sector progress. Whereas, perceived opportunities have negative association with the entrepreneurship development with the growth of banking sector, stock market and financial market. Results also indicate a positive association between opportunity entrepreneurship and entrepreneurship development. These findings have implication for policy makers to promote a well-developed financial sector in order to encourage new business entrants.
References
Adeoye, A. (2016). Microfinance Bank and Entrepreneurship Development in an Emerging Market. Risk governance & control: financial markets & institutions - Financial Markets and Institutions, 6(4). doi: www.https://doi.org/10.22495/rcgv6i4art8
Agostino, M., Errico, L., Rondinella, S., & Trivieri, F. (2022). Do cooperative banks matter for new business creation? Evidence on Italian manufacturing industry. Annals of Public Cooperative Economics, 93(3), 637-675. doi:https://doi.org/10.1111/apce.12342
Ahmad, S., Arshed, N., Salem, S., Khan, Y. A., Hameed, K., & Kam, S. (2022). Role of globalziation defining the incidence of entrepreneurship. Plos one, 17(3), e0265757. doi:https://doi.org/10.1371/journal.pone.0265757
Amin, A., Khan, R. U., & Maqsood, A. (2021). Financial development, entrepreneurship and financial openness: evidence from Asia. Journal of Economic and Administrative Sciences, ahead-of-print(ahead-of-print). doi:10.1108/JEAS-05-2021-0080
Aparicio, S., Urbano, D., & Audretsch, D. (2016). Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence. Technological Forecasting and Social Change, 102, 45-61. doi:https://doi.org/10.1016/j.techfore.2015.04.006
Arshed, N., Hameed, K., & Saher, A. (2022). Role of Globalization and Education Defining the Incidence of Entrepreneurship. Journal of the Knowledge Economy, 1-19. doi:https://doi.org/10.1007/s13132-022-01065-z
Arshed, N., Rauf, R., & Bukhari, S. (2021). Empirical contribution of human capital in entrepreneurship. Global Business Review, 17(3). doi:https://doi.org/10.1371/journal.pone.0265757
Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2011). Firm innovation in emerging markets: The role of finance, governance, and competition. Journal of Financial and Quantitative Analysis, 46(6), 1545-1580
Baliamoune, L. M., Brixiová, Z., & Ndikumana, L. (2011). Credit constraints and productive entrepreneurship in Africa.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2009). Financial institutions and markets across countries and over time-data and analysis. World Bank policy research working paper, (4943).
Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle. Journal of banking & finance, 22(6-8), 613-673.
Bongini, P., Iwanicz-Drozdowska, M., Smaga, P., & Witkowski, B. (2017). Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries. Sustainability, 9(3), 335. doi:https://doi.org/10.3390/su9030335
Botsaris, C., & Vamvaka, V. (2016). Attitude Toward Entrepreneurship: Structure, Prediction from Behavioral Beliefs, and Relation to Entrepreneurial Intention. Journal of the Knowledge Economy, 7(2), 433-460. doi:https://doi.org/10.1007/s13132-014-0227-2
Cherif, M., & Dreger, C. (2016). Institutional determinants of financial development in MENA countries. Review of Development Economics, 20(3), 670-680. doi:https://doi.org/10.1111/rode.12192
Cunat, G. R. (2015). The Stock Market as an Alternative to Banks for the Financing of New Business Projects: Business Angels. In New Challenges in Entrepreneurship and Finance (pp. 129-139): Springer.
Dutta, N., & Meierrieks, D. (2021). Financial development and entrepreneurship. International Review of Economics & Finance, 73, 114-126. doi:https://doi.org/10.1016/j.iref.2021.01.002
Ebong, K. U. (2022). The Role of Entrepreneurship for Sustainable Economic Development in Africa. International Journal of Advanced Studies in Economics and Public Sector Management, 10(1). doi:https://doi.org/10.48028/iiprds/ijasepsm.v10.i1.02
Elitcha, K. (2021). The moderating role of stock markets in the bank competition-entrepreneurship relationship. Small Business Economics, 56(4), 1333-1360. doi:https://doi.org/10.1007/s11187-019-00237-7
Fisman, R., & Love, I. (2003). Financial development and the composition of industrial growth. Journal of finance, 58(1), 267-302.
Fogel, K., Hawk, A., Morck, R., & Yeung, B. (2006). Institutional obstacles to entrepreneurship. In: Oxford University Press London.
Georgiou, M. (2009). Entrepreneurship and Stock Price Index. doi:https://doi.org/10.2139/ssrn.1482245
Ghosh, A. (2021). Banking sector openness and entrepreneurship. Journal of Financial Economic Policy. doi:https://doi.org/10.1108/jfep-03-2020-0042
Global Entrepreneurship Monitor Report. (2022). GEM Global Report - Opportunity Amid Disruption. Retrieved from https://gemconsortium.org/report/gem-20212022-global-report-opportunity-amid-disruption
Greene, W. H. (2012). Econometric Analysis (7th Ed.): Prentice Hall, Upper Saddle River.
Gunewardena, D., & Seck, A. J. R. o. D. E. (2020). Heterogeneity in entrepreneurship in developing countries: Risk, credit, and migration and the entrepreneurial propensity of youth and women. Review of Development Economics, 24(3), 713-725. doi:https://doi.org/10.1111/rode.12703
Gupta, G., & Mahakud, J. (2019). Alternative measure of financial development and investment-cash flow sensitivity: evidence from an emerging economy. Financial Innovation, 5(1), 1. doi:10.1186/s40854-018-0118-9
Hakimovna, U., & Muhammed, R. (2022). The role of banking and accounting in the development of small business and entrepreneurship. International Journal of Socialo Science Interdisciplinary Research, 11, 136-143.
Haltiwanger, J., Jarmin, R. S., & Miranda, J. (2013). Who creates jobs? Small versus large versus young. Review of Economics and Statistics, 95(2), 347-361.
Klapper, L., Laeven, L., & Rajan, R. (2004). Barriers to entrepreneurship. NBER Working Paper, 10380, 1-61.
Klapper, L., Laeven, L., & Rajan, R. (2006). Entry regulation as a barrier to entrepreneurship. Journal of financial economics, 82(3), 591-629.
Liñán, F., & Fernandez-Serrano, J. (2014). National culture, entrepreneurship and economic development: different patterns across the European Union. Small Business Economics, 42, 685-701.
Michelacci, C., & Suarez, J. (2004). Business Creation and the Stock Market. The Review of Economic Studies, 71(2), 459-481. doi:https://doi.org/10.1111/0034-6527.00292
Mudugal, S. D. (2020). Role of Exim Bank for Development of International Business-A Study. International Journal of Research Analytical Review, 7(2), 528-535.
Ngo, M. N., & Nguyen, T. N. (2022). Financial development and business growth: A case of the Southern Key Economic Region. Cogent Economics & Finance, 10(1), 2099501. doi:https://doi.org/10.1080/23322039.2022.2099501
Nguyen, C. (2018). Demographic factors, family background and prior self-employment on entrepreneurial intention - Vietnamese business students are different: why? Journal of Global Entrepreneurship Research, 8(1), 10. doi:https://doi.org/10.1186/s40497-018-0097-3
Omoruyi, A., & Ahmed, U. (2014). Financial system development and economic growth the Nigerian stock market and bank perspective. Asian Journal of Business Management, 6(4), 155-172. doi:https://doi.org/10.19026/ajbm.6.5158
Phillips, W., Lee, H., Ghobadian, A., O’regan, N., & James, P. (2015). Social innovation and social entrepreneurship: A systematic review. Group & Organization Management, 40(3), 428-461.
Pradhan, R. P., Arvin, M. B., Hall, J. H., & Bahmani, S. (2014). Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries. Review of Financial Economics, 23(4), 155-173. doi:https://doi.org/10.1016/j.rfe.2014.07.002
Reynolds, P. D., Hay, M., Bygrave, W. D., Camp, S. M., & Autio, E. (2000). Global entrepreneurship monitor 2000 executive report: Babson College. Kauffman Center for Entrepreneurial Leadership, and London Business School.
Robert, E., Christopher, S., & Nilolay, D. (2011). Institutions and Entrepreneurship Intent: A Cross-country Study Journal of Developmental Entrepreneurship, 16(02), 227-250. doi:https://doi.org/10.1142/S1084946711001811
Rudhumbu, N., du Plessis, E. C., & Maphosa, C. (2020). Challenges and opportunities for women entrepreneurs in Botswana: revisiting the role of entrepreneurship education. Journal of International Education in Business, 13(2), 183-201. doi:10.1108/JIEB-12-2019-0058
Rusu, V. D., Roman, A., Tudose, M. B., & Cojocaru , O. M. (2022). An Empirical Investigation of the Link between Entrepreneurship Performance and Economic Development: The Case of EU Countries. Applied Sciences, 12(14), 6867. doi:https://doi.org/10.3390/app12146867
Shah, I. A., Amjed, S., & Jaboob, S. (2020). The moderating role of entrepreneurship education in shaping entrepreneurial intentions. Journal of Economic Structures, 9(1), 19. doi:https://doi.org/10.1186/s40008-020-00195-4
Shahabadi, A., Moradi, A., & Rahwardarzadeh, M. R. (2021). The Effect of Entrepreneurship on Development of Banking Sector in Developing and Developed Selected Countries. 8(2).
Singh, A. K. (2013). Entrepreneurship Development : Role of State bank of India in Mizoram. Indian Journal of Management Science, 3(4), 49.
Singh, R., Mahal, J., Kumar, A., & Chahal, V. (2020). Establishment of machinery bank for attracting rural youth for entrepreneurship development. Journalk of Krishi Vigyan, 9(9), 125-130. doi:10.5958/2349-4433.2020.00195.6
Tatarinov, V., & Fihurovska, I. (2019). Small Business as a Factor of Growth of Stock Market Capitalization. Academy Review, 1(50). doi:10.32342/2074-5354-2019-1-50-4
Tehseen, S., & Haider, S. A. (2021). Impact of Universities’ Partnerships on Students’ Sustainable Entrepreneurship Intentions: A Comparative Study. Sustainability, 13(9), 5025. doi:https://doi.org/10.3390/su13095025
Tian, H., Akhtar, S., Qureshi, N. A., & Iqbal, S. (2022). Predictors of entrepreneurial intentions: The role of prior business experience, opportunity recognition, and entrepreneurial education. Frontiers in Psychology, 13. doi:https://doi.org/10.3389/fpsyg.2022.882159
Vatavu, S., Dogaru, M., Moldovan, N.-C., & Lobont, O.-R. (2022). The impact of entrepreneurship on economic development through government policies and citizens’ attitudes. Journal of Economic Research- Ekonomska Istraživanja, 35(1), 1604-1617. doi:https://doi.org/10.1080/1331677X.2021.1985566
Veleva, V. (2021). The role of entrepreneurs in advancing sustainable lifestyles: Challenges, impacts, and future opportunities. Journal of cleaner production, 283, 124658.
Wagner, J. (2006). Nascent entrepreneurs. In The life cycle of entrepreneurial ventures (pp. 15-37): Springer.
Wennberg, K., & Delmar, F. (2010). What do they think and feel about growth? An expectancy–value approach to small business managers’ attitudes toward growth. Entrepreneurship Theory and Practice, 34(3), 493-516.
Wennekers, S., Van Stel, A., Thurik, R., & Reynolds, P. (2008). Erratum: Nascent entrepreneurship and the level of economic development (Small Business Economics (2005) 24: 3 (293-309. Small Business Economics, 30(3).
Zahra, S. A., Gedajlovic, E., Neubaum, D. O., & Shulman, J. M. (2009). A typology of social entrepreneurs: Motives, search processes and ethical challenges. Journal of business venturing, 24(5), 519-532.
Zaman, K., Izhar, Z., Khan, M. M., & Ahmad, M. (2012). The relationship between financial indicators and human development in Pakistan. Economic Modelling, 45. doi:https://doi.org/10.1016/j.econmod.2012.05.013
Zhao, H., & Seibert, S. E. (2006). The big five personality dimensions and entrepreneurial status: a meta-analytical review. Journal of applied psychology, 91(2), 259.
Downloads
Published
Issue
Section
License
This Journal is licensed under a Creative Commons Attribution-Non Commercial-No Derivers 4.0 International license.
1.The author (s) authorize the publication of the article in the journal;
2.The author (s) warrant that the contribution is original and unpublished and is not in the process of being evaluated in other journal (s);
3. The journal is not responsible for the opinions, ideas and concepts emitted in the texts, as they are the sole responsibility of its author (s);
4. The editors are entitled to make textual adjustments and to adapt the articles to the standards of publication.
