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SMEs employment growth under heterogeneous credit constraints

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  • Ioannis Vlassas
  • Nicholas Giannakopoulos
  • Christos Kallandranis

Abstract

This study investigates the impact of heterogeneous credit constraints on employment growth among small and medium-sized enterprises (SMEs). Firms that are either fully credit-rationed or discouraged from applying for credit are found to be five percentage points less likely to expand their workforce compared to those successfully obtaining bank loans. These findings highlight that credit frictions affect not only investment decisions, but also hiring behavior. The results are robust to alternative definitions of credit constraints and remain consistent when addressing endogeneity using inverse probability weighting methods. Overall, the study underscores the critical role of credit access in shaping SME employment dynamics and provides insights for policies aimed at fostering SME-led job creation.

Suggested Citation

  • Ioannis Vlassas & Nicholas Giannakopoulos & Christos Kallandranis, 2026. "SMEs employment growth under heterogeneous credit constraints," Journal of Small Business Management, Taylor & Francis Journals, vol. 64(2), pages 739-780, March.
    • Handle: RePEc:taf:ujbmxx:v:64:y:2026:i:2:p:739-780
    DOI: 10.1080/00472778.2025.2501086
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