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The impact of loan financing on SME’s from transitional countries

Author

Listed:
  • Jens Hoelscher

    () (Bournemouth University, Executive Business Centre)

  • Peter Howard-Jones

    () (Bournemouth University, Executive Business Centre)

  • Allan Webster

    () (Bournemouth University, Executive Business Centre)

Abstract

This study considers the impact of finance (loans) on the performance and productive efficiency of a sample of 8037 SMEs from transitional countries. An extensive macro-economic literature supports the importance of finance to growth. For this to be truly convincing it is necessary to show that firm performance is strengthened by loans. There are very few firm level studies of the linking loans and firm performance. This study extends the firm level literature using the 2013 BEEPS survey .It uses three different methodologies, all incorporating firm heterogeneity. Firstly, we use propensity score matching to test whether loans result in enhanced performance and finds that loans did indeed improve performance. Secondly, we re-enforce these conclusions using inverse probability weighted regression adjustment (IPWRA) analysis. Finally we employ a stochastic frontier approach to (a) measure firm inefficiency and (b) to show that loans create a statistically significant reduction in this inefficiency.

Suggested Citation

  • Jens Hoelscher & Peter Howard-Jones & Allan Webster, 2016. "The impact of loan financing on SME’s from transitional countries," BAFES Working Papers BAFES01, Department of Accounting, Finance & Economic, Bournemouth University.
  • Handle: RePEc:bam:wpaper:bafes01
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    File URL: https://repec.bmth.ac.uk/bam/wp/BAFES01.pdf
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    Keywords

    SMEs; finance; transition; efficiency;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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