This paper investigates how financial and institutional development affects the financing patterns of large and small firms across 48 countries. Using a firm-level survey database, the authors find that small firms use less external finance, particularly bank finance, compared to large firms. Property rights protection significantly increases external financing for small firms, mainly through bank finance. Small firms do not rely more on leasing or trade finance to compensate for lower access to bank finance. Larger firms are more likely to expand external financing when constrained. The study also finds evidence supporting the pecking order theory, where firms with higher financing constraints are less likely to issue equity. Overall, the results highlight the importance of improving institutional environments to enhance small firms' access to external finance.This paper investigates how financial and institutional development affects the financing patterns of large and small firms across 48 countries. Using a firm-level survey database, the authors find that small firms use less external finance, particularly bank finance, compared to large firms. Property rights protection significantly increases external financing for small firms, mainly through bank finance. Small firms do not rely more on leasing or trade finance to compensate for lower access to bank finance. Larger firms are more likely to expand external financing when constrained. The study also finds evidence supporting the pecking order theory, where firms with higher financing constraints are less likely to issue equity. Overall, the results highlight the importance of improving institutional environments to enhance small firms' access to external finance.