Financial constraints and relationship lending in the growth of italian SMEs
AbstractOur study confirms that the financial constraints to SME’s growth tend to appear as an excess of sensibility of the investment expenditures on firm’s cash flow. Through the application of dynamic panel data techniques to an extended version of Eulero’s investment equation of a sample of Italian SMEs, the analysis shows that the growth of the subsample of the small firms in backward regions of Italy is more constrained by inside finance than that of firms in more developed regions. This is because the typical information opacity of SMEs is worsened here by the unsatisfactory development of financial markets. Moreover, our analysis ascertains that the small firms can significantly relax the constraints if they are able to establish a close relationship with the banks making easier the access of bank to firm’s information.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39825.
Date of creation: 04 Jul 2012
Date of revision:
firm growth; financial constraints; relationship lending;
Find related papers by JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-14 (All new papers)
- NEP-BAN-2012-07-14 (Banking)
- NEP-ENT-2012-07-14 (Entrepreneurship)
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