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Long-term debt maturity and financing constraints of SMEs during the Global Financial Crisis

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  • Veronique Vermoesen
  • Marc Deloof

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  • Eddy Laveren

Abstract

We use the recent financial crisis to investigate financing constraints of private small and medium-sized enterprises (SMEs) in Belgium. We hypothesize that SMEs with a large proportion of long-term debt maturing at the start of the crisis had difficulties to renew their loans due to the negative credit supply shock, and hence could invest less. We find a substantial variation in the maturity structure of long-term debt. Firms which at the start of the crisis had a larger part of their long-term debt maturing within the next year experienced a significantly larger drop in investments in 2009. This effect is driven by firms which are ex ante more likely to be financially constrained. Consistent with a causal effect of a credit supply shock to corporate investments, we find no effect in “placebo” periods without a negative credit supply shock. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • Veronique Vermoesen & Marc Deloof & Eddy Laveren, 2013. "Long-term debt maturity and financing constraints of SMEs during the Global Financial Crisis," Small Business Economics, Springer, vol. 41(2), pages 433-448, August.
  • Handle: RePEc:kap:sbusec:v:41:y:2013:i:2:p:433-448
    DOI: 10.1007/s11187-012-9435-y
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    References listed on IDEAS

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    Cited by:

    1. Florian LEON, 2018. "Long-Term Finance and Entrepreneurship," CREA Discussion Paper Series 18-01, Center for Research in Economic Analysis, University of Luxembourg.
    2. repec:eee:ecmode:v:69:y:2018:i:c:p:13-25 is not listed on IDEAS
    3. repec:gam:jecomi:v:5:y:2017:i:4:p:47-:d:120891 is not listed on IDEAS
    4. Apostolos Dasilas & Nicolas Papasyriopoulos, 2015. "Corporate governance, credit ratings and the capital structure of Greek SME and large listed firms," Small Business Economics, Springer, vol. 45(1), pages 215-244, June.
    5. Giebel, Marek & Kraft, Kornelius, 2018. "Bank credit supply and firm innovation," ZEW Discussion Papers 18-011, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. González, Víctor M., 2015. "The financial crisis and corporate debt maturity: The role of banking structure," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 310-328.
    7. Heidi Vander Bauwhede & Michiel De Meyere & Philippe Van Cauwenberge, 2015. "Financial reporting quality and the cost of debt of SMEs," Small Business Economics, Springer, vol. 45(1), pages 149-164, June.
    8. Ramzi Benkraiem, 2014. "Small business investment sensitivity of debt before and during the global crisis," Economics Bulletin, AccessEcon, vol. 34(2), pages 1185-1196.
    9. repec:eee:finsta:v:31:y:2017:i:c:p:136-153 is not listed on IDEAS
    10. Demirgüç-Kunt, Asli & Horváth, Bálint L. & Huizinga, Harry, 2017. "How does long-term finance affect economic volatility?," Journal of Financial Stability, Elsevier, vol. 33(C), pages 41-59.
    11. Alves, Paulo & Francisco, Paulo, 2015. "The impact of institutional environment on the capital structure of firms during recent financial crises," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 129-146.
    12. Mascia, Danilo V., 2018. "Young Enterprises and Bank Credit Denials," ADBI Working Papers 844, Asian Development Bank Institute.
    13. Marc Cowling & Weixi Liu & Maria Minniti & Ning Zhang, 2016. "UK credit and discouragement during the GFC," Small Business Economics, Springer, vol. 47(4), pages 1049-1074, December.
    14. Robert Rubin, 2011. "The Global Financial Crisis and Its Ramifications," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 119(1), pages 5-12.
    15. Danilo V. Mascia, 2018. "Young Enterprises and Bank Credit Denials," Working Papers id:12814, eSocialSciences.
    16. ManYing Kang & Marcel Ausloos, 2017. "An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies," Papers 1712.00602, arXiv.org.
    17. Demeulemeester, Sarah & Hottenrott, Hanna, 2015. "R&D subsidies and firms' cost of debt," DICE Discussion Papers 201, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    18. Milos Markovic & Michael A. Stemmer, 2017. "Firm Growth Dynamics and Financial Constraints: Evidence from Serbian Firms," Documents de travail du Centre d'Economie de la Sorbonne 17012, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    19. repec:ana:journl:v:4:y:2018:i:1:p:21-38 is not listed on IDEAS
    20. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2015. "Analysis of Credit Ratings for Small and Medium-Sized Enterprises: Evidence from Asia," Asian Development Review, MIT Press, vol. 32(2), pages 18-37, September.
    21. repec:spr:eurasi:v:8:y:2018:i:2:d:10.1007_s40821-017-0079-3 is not listed on IDEAS

    More about this item

    Keywords

    Privately held SMEs; Financing constraints; Long-term debt maturity; Global Financial Crisis; Belgium; G01; G31; G32;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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