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Financial Constraints of EU firms: A Sectoral Analysis

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Abstract

In this paper we provide estimates of financial constraints in all EU sectors. Our empirical strategy consists in using the Orbis firm-level dataset to construct financial constraint measures for each of the firms in our sample, and then aggregate the results either by NACE code, or by business similarity. We use two main – somewhat complementary – financial constraint indices proposed by Ferrando et al (2015), and then submit them to a battery of robustness tests, including the alternative financial constraints estimators developed by Kaplan and Zingales (1997), Whited and Wu (2006), and Hadlock and Pierce (2010). We also establish correlations between a sector’s degree of financial constraints and other sectoral characteristics, such as firm size, TFP, capital intensity, and innovativeness. The results show that sectoral financial constraints do not converge for all indicators; yet there are sectors that classify at the bottom or top by two or more financial constraints measures. Tighter sectoral financial constraints tend to be associated with a lower firm size, a capital intensity much higher than average, and a total factor productivity lower than average.

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  • ASDRUBALI Pierfederico & HALLAK Issam & HARASZTOSI Peter, 2022. "Financial Constraints of EU firms: A Sectoral Analysis," JRC Research Reports JRC130317, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc130317
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    Keywords

    Financial constraints; capital intensity; firm size; productivity;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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