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Sovereign stress and SMEs’ access to finance: Evidence from the ECB's SAFE survey

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  • Ferrando, Annalisa
  • Popov, Alexander
  • Udell, Gregory F.

Abstract

We study the effect of sovereign stress on SMEs’ capital structure using restricted-access data from the European Central Bank. We find that during the sovereign debt crisis, and controlling for borrowers’ quality, firms in stressed countries became more likely to be denied credit, to be credit rationed, and to face higher loan rates. Less creditworthy firms were not more likely to become credit constrained, suggesting no flight to quality in lending. We also find that in order to make up for the decline in bank credit firms in stressed countries began relying considerably more on retained earnings and government subsidies.

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  • Ferrando, Annalisa & Popov, Alexander & Udell, Gregory F., 2017. "Sovereign stress and SMEs’ access to finance: Evidence from the ECB's SAFE survey," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 65-80.
  • Handle: RePEc:eee:jbfina:v:81:y:2017:i:c:p:65-80
    DOI: 10.1016/j.jbankfin.2017.04.012
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    Keywords

    Sovereign stress; Credit access; SMEs;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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