According to multi-decade survey results, more than three quarters of Moroccan manufacturing firms identify access to finance as one of the major constraints affecting their performance. Compared to a number of emerging countries, however, Moroccan firms appear relatively undercapitalized and more reliant on external finance. These two findings have very different policy implications.
In a new paper, Lachen Achy provides a rigorous understanding of the rationale behind financial choices made by Moroccan firms, and assess the severity of the financial constraints they face. The paper uses a panel dataset covering 550 non-listed manufacturing firms over the period 1998–2003 and investigates both long-term and short-term measures of leverage with the objective of understanding the factors that shape “debt-equity choice” as well as “debt maturity structure”.
His analysis reveals the existence of a negative relationship between asset tangibility and both aggregate leverage and short-term debt ratio.Small firms tend to increase their debt instead of opening their capital to outside investors and larger firms seem to rely much more on their retained earnings for their long-term financial needs. For short-term debt, size does not appear to matter. The impact of growth is positive on short-term leverage and irrelevant for long-term leverage. Profitability is found to exert a positive effect on long-term leverage and a negative one on short term leverage.