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Bank loan application success by SMEs: the role of ownership structure and innovation

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  • Peter van der Zwan

Abstract

This paper focuses on SMEs – firms with 250 employees at most – and the proportion of their requested loan that is granted by the bank. Financial data for SMEs in 38 European countries for 2011 are used (SMEs’ Access to Finance survey) to test the relationship between ownership structure and innovation on the one hand and loan application success on the other hand. The set of control variables includes firm age, firm size, past firm growth, expected firm growth, and sector orientation. Focusing on the determinants of access to finance is important because restricted access could hinder firm growth. It turns out that SMEs that are part of a business group and SMEs with a multiple ownership structure have higher probabilities of receiving the requested bank loan than SMEs with a single owner. There is some evidence that female owned business have more success regarding their loan applications than male owned businesses. Furthermore, SMEs that adopt product or process innovations are less likely to receive the requested loan than SMEs that do not display innovative behavior. The robustness of these findings across several model specifications is shown and the implications of the findings are discussed.

Suggested Citation

  • Peter van der Zwan, 2014. "Bank loan application success by SMEs: the role of ownership structure and innovation," Scales Research Reports H201404, EIM Business and Policy Research.
  • Handle: RePEc:eim:papers:h201404
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    File URL: http://www.entrepreneurship-sme.eu/pdf-ez/H201404.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sandra M. Leitner & Robert Stehrer, 2015. "What Determines SMEs’ Funding Obstacles to Bank Loans and Trade Credits?," wiiw Working Papers 114, The Vienna Institute for International Economic Studies, wiiw.

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