This paper investigates how financial and institutional development affect the financing of large and small firms globally. Using a firm-level survey database covering 48 countries, the study finds that small firms use less external finance, especially bank finance, compared to large firms. Protection of property rights significantly increases external financing for small firms more than for large firms, mainly due to its effect on bank finance. Small firms do not use disproportionately more leasing or trade finance compared to larger firms, so these sources do not compensate for lower access to bank financing of small firms. Larger firms more easily expand external financing when they are constrained than small firms. The study also finds suggestive evidence that the pecking order holds across countries. The paper explores the relation between firms' external financing and a country's financial and legal institutions, considering a broader spectrum of external financing sources likely to be more relevant for smaller firms. It assesses whether the relation between firms’ financing patterns and firm size varies across different levels of financial and institutional development and if this varies with the level of financing constraints. The study uses firm-level data from the World Business Environment Survey (WBES), which includes information on financing choices for nearly 3,000 firms in 48 countries. The survey covers small and medium enterprises (80% of the observations), and includes information on sources of financing such as leasing, trade credit, and government and informal sources. It also includes an indicator of the extent to which firms consider themselves financially constrained. The results show that smaller firms finance a lower proportion of their investment externally, particularly because they make use of bank finance to a lesser extent. Small firms' financing constraints are not as strongly associated with external finance, suggesting that they are less likely and able to expand external financing as they become more financially constrained compared with large firms. Small firms benefit disproportionately from higher levels of property rights protection by using significantly more external finance, particularly from banks. The study finds that small firms use significantly more informal finance than large firms, but financing from such sources is limited. The use of informal financing does little to relax financial constraints faced by small firms in developing economies. Small firms do not use disproportionately more leasing or trade finance compared with larger firms. In particular, financing from leasing does not fill the financing gap of small firms in countries with underdeveloped institutions because the use of leasing finance is positively associated with the development of financial institutions and equity markets. Small firms also do not finance their investment significantly more from government sources or development banks despite the fact that such programs are often politically justified as increasing financing for small firms. The study finds a negative relation between the proportion of firms in a country that report being financially constrained and the proportion of firms that issue equity, consistent with the pecking order theory of Myers and Majluf (1984). The results suggest that the majority of firms become constrained before they issue equity. The study also finds that financial and institutional development, as measured by private credit, stockThis paper investigates how financial and institutional development affect the financing of large and small firms globally. Using a firm-level survey database covering 48 countries, the study finds that small firms use less external finance, especially bank finance, compared to large firms. Protection of property rights significantly increases external financing for small firms more than for large firms, mainly due to its effect on bank finance. Small firms do not use disproportionately more leasing or trade finance compared to larger firms, so these sources do not compensate for lower access to bank financing of small firms. Larger firms more easily expand external financing when they are constrained than small firms. The study also finds suggestive evidence that the pecking order holds across countries. The paper explores the relation between firms' external financing and a country's financial and legal institutions, considering a broader spectrum of external financing sources likely to be more relevant for smaller firms. It assesses whether the relation between firms’ financing patterns and firm size varies across different levels of financial and institutional development and if this varies with the level of financing constraints. The study uses firm-level data from the World Business Environment Survey (WBES), which includes information on financing choices for nearly 3,000 firms in 48 countries. The survey covers small and medium enterprises (80% of the observations), and includes information on sources of financing such as leasing, trade credit, and government and informal sources. It also includes an indicator of the extent to which firms consider themselves financially constrained. The results show that smaller firms finance a lower proportion of their investment externally, particularly because they make use of bank finance to a lesser extent. Small firms' financing constraints are not as strongly associated with external finance, suggesting that they are less likely and able to expand external financing as they become more financially constrained compared with large firms. Small firms benefit disproportionately from higher levels of property rights protection by using significantly more external finance, particularly from banks. The study finds that small firms use significantly more informal finance than large firms, but financing from such sources is limited. The use of informal financing does little to relax financial constraints faced by small firms in developing economies. Small firms do not use disproportionately more leasing or trade finance compared with larger firms. In particular, financing from leasing does not fill the financing gap of small firms in countries with underdeveloped institutions because the use of leasing finance is positively associated with the development of financial institutions and equity markets. Small firms also do not finance their investment significantly more from government sources or development banks despite the fact that such programs are often politically justified as increasing financing for small firms. The study finds a negative relation between the proportion of firms in a country that report being financially constrained and the proportion of firms that issue equity, consistent with the pecking order theory of Myers and Majluf (1984). The results suggest that the majority of firms become constrained before they issue equity. The study also finds that financial and institutional development, as measured by private credit, stock