Financial Liberalization and Financial Constraints on the Corporate Sector in Tunisia

This paper studies the impact of the financial and economic liberalization in Tunisia since the mid-1980s on the financial structure and behavior of the corporate sector. We analyze the effect of financing constraints, due to market imperfections as well as credit allocation policies, on the determinants of investment and indebtedness of the corporate sector. A number of firm characteristics are found to imply significantly different financing constraints: government ownership, trade orientation, and size of firm. We also investigate the impact of financial liberalization on the economic performance of firms. Our results show a strong, mostly positive, effect of financial liberalization on the economic performance, as well as on financial structure, investment and financing behavior of Tunisian firms.