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Credit Rationing and the Financial Structure of Italian Small and Medium Enterprises

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  • Giovanni Trovato
  • Marco Alfò

Abstract

Our aim is to analyze the effect of public subsidies on the development path of Italian small and medium enterprises (SMEs). Public subsidies to SMEs have been often used with the aim of favoring economic growth in less developed regions. The main theoretical arguments justifying this intervention are related to the idea that public subsidies can solve lack-of- capital problems deriving from asymmetric information. According to Stiglitz and Weiss (1981), public subsidies to rationed firms can reduce the informational gap, leading subsidized firms to reduce their financial constraints and to increase their investment levels. Results obtained modelling leverage, performance and investment behaviour in a panel of around 1,900 enterprises over the years 1989 to 1994 seem to confirm the working hypotheses. However, they can not be considered as conclusive and further research is needed in this context.

Suggested Citation

  • Giovanni Trovato & Marco Alfò, 2006. "Credit Rationing and the Financial Structure of Italian Small and Medium Enterprises," Journal of Applied Economics, Taylor & Francis Journals, vol. 9(1), pages 167-184, May.
    • Handle: RePEc:taf:recsxx:v:9:y:2006:i:1:p:167-184
    DOI: 10.1080/15140326.2006.12040643
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    Cited by:

    1. Horvath, Akos & Lang, Peter, 2021. "Do loan subsidies boost the real activity of small firms?," Journal of Banking & Finance, Elsevier, vol. 122(C).
    2. Annalisa Castelli & Gerald P. Dwyer & Iftekhar Hasan, 2012. "Bank Relationships and Firms' Financial Performance: The Italian Experience," European Financial Management, European Financial Management Association, vol. 18(1), pages 28-67, January.
    3. Miglo, Anton, 2022. "Theories of financing for entrepreneurial firms: a review," MPRA Paper 115835, University Library of Munich, Germany.
    4. DiMaria, charles-henri, 2024. "ESG principles: the limits to green benchmarking," MPRA Paper 120410, University Library of Munich, Germany, revised 2024.
    5. V. Grinchenko, 2016. "Capital structure of small and medium enterprises," Economy and Forecasting, Valeriy Heyets, issue 1, pages 142-156.

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