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The relationship between firm size and efficiency: why does default on bank loans matter?

Author

Listed:
  • Agnese Rapposelli

    (University “G. D’Annunzio” of Chieti-Pescara)

  • Giuliana Birindelli

    (University of Pisa)

  • Michele Modina

    (University of Molise)

Abstract

This paper presents an investigation of the interconnection between firm size and efficiency under the financial constraints lens. Specifically, we used the Data Envelopment Analysis (DEA) technique to measure the efficiency of a sample of large, medium-sized and small private Italian firms, using the firms’ default risk as an undesirable output. Our findings indicate that larger companies perform better than medium-sized and smaller companies in terms of efficiency (across all business profiles), including default on bank loans. Based on indicators widely employed to characterize the bank-firm relationship, our study demonstrates the need to improve the efficiency of the Italian entrepreneurial system, consisting mainly of small companies, through their dimensional growth.

Suggested Citation

  • Agnese Rapposelli & Giuliana Birindelli & Michele Modina, 2024. "The relationship between firm size and efficiency: why does default on bank loans matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(4), pages 3379-3401, August.
    • Handle: RePEc:spr:qualqt:v:58:y:2024:i:4:d:10.1007_s11135-023-01810-9
    DOI: 10.1007/s11135-023-01810-9
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    More about this item

    Keywords

    Credit risk; Data Envelopment Analysis; Efficiency; Firm size; Financial constraints;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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