Working Paper Series: Special Edition of 2016 to 2018 Interns

found to have a significant impact on the likelihood of firms demanding credit. As such, firms with audited financial statements are 49per cent less likely to be discouraged from applying for credit. Additionally the variable foreign was found to have a significant impact on demand for credit however; the odds of foreign owned firms demanding credit were less than 1per cent. This is because foreign owned firms often secure their financing abroad before making investments domestically. In addition, given their reputation and the diverse financing options available to them, they are less likely to demand credit from domestic markets. Firms that have invested in product development were significant and 30per cent less likely to demand credit. This is in contradiction with the a priori for this variable, as it was expected that firms that have invested towards developing their products would have a higher need for credit. However, it appears that firms are more likely to use internal funds for investment financing as evidenced in section 5.2 and table 7 (appendix 1C). This is also consistent with the findings of Chen & Jung (2011) who found that firms prefer to use internal financing, resorting to debt only when capital is insufficient. Lastly, university & postgraduate, partnership, duration, growth, overdraft exporter, collateral, innovation, technical were found to be not significantly associated with the demand for credit. The country variable real interest were found to significantly reduce firms demand for credit, whereas income as measured by the log of GDP per-capita had no significant effect on the likelihood of firms need for credit. 6 Conclusion Using firm level data this paper investigated whether firm characteristics as well as bank relationship and creditworthiness characteristics were more likely to place firms in a position to access credit or whether it increases the likelihood of them being financially constrained in CARICOM and the ECCU member countries. Findings suggest that small and medium firms are more likely to be financially constrained and discouraged due to their small size for both models in the two samples.

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