SMEsâ€™ Access to Finance in the Euro Area; What Helps or Hampers?
The monetary transmission mechanism in the euro area has been adversely affected by the recent crises. Using survey data on thousands of euro area firms, we study factors that affect the access to finance of SMEs. We find that changes in bank funding costs and borrower leverage matter for firmsâ€™ access to finance. Increases in bank funding costs and borrowersâ€™ debt-to-asset ratios are significantly and negatively associated with firmsâ€™ access to finance. The use of subsidies significantly improve access to finance of SMEs. Finally, access to finance is found to be positively related to firm size and firm age.
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