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The credit crunch and firm growth in the euro area: 2005-2011. A quantile panel analysis

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  • Sophia Dimelis

    (Bank of Greece)

  • Ioannis Giotopoulos

    (Bank of Greece)

  • Helen Louri

    (Bank of Greece)

Abstract

This paper explores the effects of bank credit on firm growth before and after the recent financial crisis outbreak, taking into account different structural characteristics of the banking sector and the domestic economy. The econometric method of panel quantiles is used on a large sample of 2075 firms operating in the euro area (17 countries) for the period 2005-2011. The main results of this paper indicate a strong dependence of firm growth on credit expansion before the crisis. However, post-2008, the credit crunch seems to seriously affect only slow-growth firms and especially those operating in domestic bank-dominated economies. Furthermore, the classification of firms in groups by size yields interesting results: the credit crunch exhibits a strong impact on small firms only. Separate estimates for more and less financially developed economies show that the credit crunch matters mainly in countries with a lower degree of financial development. Moreover, our findings reveal that the degree of banking concentration affects firm growth in a negative way in most estimates. Finally, risk and financial stability matter for firm growth for the total sample and for domestic bank-dominated economies, while in general they do not matter when markets are dominated by foreign banks.

Suggested Citation

  • Sophia Dimelis & Ioannis Giotopoulos & Helen Louri, 2013. "The credit crunch and firm growth in the euro area: 2005-2011. A quantile panel analysis," Working Papers 165, Bank of Greece.
  • Handle: RePEc:bog:wpaper:165
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    References listed on IDEAS

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    1. Ioannis Giotopoulos, 2014. "Dynamics of Firm Profitability and Growth: Do Knowledge-Intensive (Business) Services Persistently Outperform?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(3), pages 291-319, November.
    2. A. Arrighetti & F. Landini & A. Lasagni, 2015. "Firms’economic crisis and firm exit: do intangibles matters?," Economics Department Working Papers 2015-EP04, Department of Economics, Parma University (Italy).

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    More about this item

    Keywords

    Credit Crunch; Firm Growth; Foreign Bank Penetration; Banking Concentration; Financial Crisis; Panel Quantile Regressions; Financial Development;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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