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Do Credit Constraints Affect SME Investment and Employment?

Listed author(s):
  • Petra Gerlach-Kristen

    (Swiss National Bank, Zurich, Switzerland)

  • Brian O'Connell

    (Indecon International Economic Consultants, Dublin)

  • Conor O'Toole

    (Central Bank of Ireland)

This paper explores the potential presence of credit constraints confronting Irish SMEs and investigates the impact of these constraints on firms’ employment and investment. Using new survey data collected by the Department of Finance, we define firms as credit rationed or discouraged borrowers and link these constraints to employment and the propensity to invest. We find a negative and significant effect of SME credit constraints on employment for firms that are discouraged from applying for credit. We also find a negative effect of constraints on the probability of an SME investing. This effect is driven by firms who are credit rationed when seeking capacity expansion loans.

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File URL: http://www.esr.ie/article/download/291/103/291-820-1-PB.pdf
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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 46 (2015)
Issue (Month): 1 ()
Pages: 51-86

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Handle: RePEc:eso:journl:v:46:y:2015:i:1:p:51-86
Contact details of provider: Web page: http://www.esr.ie

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