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Small business finance in Italy

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  • Guiso, Luigi

    ()
    (University of Sassari)

Abstract

Using survey data on Italian manufacturing firms, this paper examines firms' capital structure and their access to financial debt, notably bank loans. We find that the share of financial debt in total liabilities is, on average, smaller for small firms than for large ones. However, this is not because the typical small firm borrows less than a large firm, but because small firms are more likely not to borrow at all. For firms that do borrow, the share of financial debt varies little with firm size. The absence of financial debt on the balance sheet of many firms is mainly because they do not want to borrow, not because lenders do not want to lend. Thus, credit rationing does not appear to be a widespread phenomenon, but when it happens, lack of size and equity seems to play a key role.

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Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 10/2003.

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Length: 30 pages
Date of creation: 09 Jun 2003
Date of revision:
Handle: RePEc:ris:eibpap:2003_010

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Related research

Keywords: Italian manufacturing firms; capital structure; financial debt; Credit rationing;

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References

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  1. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999. "What Determines Firm Size?," NBER Working Papers 7208, National Bureau of Economic Research, Inc.
  2. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May.
  3. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
  4. Guiso, L. & Parigi, G., 1996. "Investment and Demand Uncertainty," Papers 289, Banca Italia - Servizio di Studi.
  5. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
  6. Oliver Hart & John Moore, 1995. "A Theory of Debt Based on the Inalienability of Human Capital," NBER Working Papers 3906, National Bureau of Economic Research, Inc.
  7. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox Of Liquidity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 733-771, August.
  8. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March.
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Citations

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Cited by:
  1. Neuberger, Doris & Räthke, Solvig, 2006. "Microenterprises and multiple bank relationships: Evidence from a survey among professionals," Thuenen-Series of Applied Economic Theory 61, University of Rostock, Institute of Economics.
  2. Wagenvoort, Rien, 2003. "BANK SURVEY EVIDENCE ON "BANK LENDING TO SMEs IN THE EUROPEAN UNION"," Economic and Financial Reports 2003/1, European Investment Bank, Economics Department.
  3. Silvia Magri, 2009. "The financing of small entrepreneurs in Italy," Annals of Finance, Springer, vol. 5(3), pages 397-419, June.
  4. Molinari, Massimo, 2013. "Joint analysis of the non-linear debt–growth nexus and cash-flow sensitivity: New evidence from Italy," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 34-44.
  5. Brick, Ivan E. & Palia, Darius, 2007. "Evidence of jointness in the terms of relationship lending," Journal of Financial Intermediation, Elsevier, vol. 16(3), pages 452-476, July.
  6. Giorgio Albareto & Paolo Finaldi Russo, 2012. "Financial fragility and growth prospects: credit rationing during the crisis," Questioni di Economia e Finanza (Occasional Papers) 127, Bank of Italy, Economic Research and International Relations Area.
  7. Busetta, Giovanni & Presbitero, Andrea F., 2008. "Confidi, Piccole Imprese E Banche: Un'Analisi Empirica
    [Mutual Loan-Guarantee Societies, Small Firms and Banks: An Empirical Investigation]
    ," MPRA Paper 7832, University Library of Munich, Germany.
  8. Riccardo Calcagno & Roman Kraeussl & Chiara Monticone, 2011. "An analysis of the effects of the severance payment reform on credit to Italian SMEs," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(3), pages 243-261, August.
  9. Doris Neuberger & Maurice Pedergnana & Solvig Räthke-Döppner, 2008. "Concentration of Banking Relationships in Switzerland: The Result of Firm Structure or Banking Market Structure?," Journal of Financial Services Research, Springer, vol. 33(2), pages 101-126, April.
  10. Gómez-González, José Eduardo & Reyes, Nidia Ruth, 2011. "The number of banking relationships and the business cycle: New evidence from Colombia," Economic Systems, Elsevier, vol. 35(3), pages 408-418, September.
  11. Doris Neuberger & Solvig Räthke, 2009. "Microenterprises and multiple bank relationships: The case of professionals," Small Business Economics, Springer, vol. 32(2), pages 207-229, February.

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