Working Paper Series: Special Edition of 2016 to 2018 Interns

The control variables “ country ” were included in all regressions to account for any heterogeneity that may arise at the country level. Additionally, to account for variation among firms clustering of the errors at the industry level was allowed 7 . This allows for correlation of the firms within similar industries but not across the different industries. This was done because: 1) firms in manufacturing and services both differ in their financing patterns, mode of operations and the way in which they carry out transactions; and (2) the estimators could be grossly overstated under default standard errors (Cameron & Miller, 2013). This Section looks at the different financing patterns of firms working and fixed capital and the different types of facilities firms use in the CARICOM region. From table 2 (appendix 1B) it can be observed that across the board all firms basically fund more than 50.0 per cent of their working capital needs using internal sources of revenue. Small firms are observed to use less financing from private commercial banks as compared to medium and large firms. However, only 15.0 per cent of the firms made use of private commercial banks for financing working capital. Small and medium firms use more credit from private commercial banks than state-owned banks. Overall contribution by state banks to working capital financing is the lowest at only 3.0 per cent of the total. Supplier credit is the second largest contributor to working capital financing with an overall 17.0 per cent contribution. Other sources of financing account for just over 4.0 per cent of the total working capital financing. Table 3 (appendix1B) illustrates firms’ fixed capital financing by size and institution. Small and medium firms finance a greater proportion of their fixed capital using internal funds as compared to larger firms. Internal funds account for an overall 63.0 per cent of firms total fixed capital financing. Private commercial banks are the second largest accounting for just over 22.0 per cent of funding for fixed capital purchases. Larger firms are observed to use more bank credit than small and medium firms in financing fixed capital purchases. Other sources which is inclusive of 5 Financing Pattern and Regression Results 5.1 Financing in CARICOM

7 See studies by (Beck, et al., 2008) (Seker & Correa, 2010); for a more detailed description of clustering robust standard errors by industry see (Petersen, 2007) and (Cameron & Miller, 2013).

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