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Are finance constraints hindering the growth of SMEs in Europe?

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  • Rien Wagenvoort

    (European Investment Bank, Economic and Financial Studies)

Abstract

This paper examines whether small and mediumsized enterprises (SMEs) in Europe suffer from a structural financing problem that hinders their growth. To this end, we estimate growth-cashflow sensitivities for firms in different size classes. Our results show that the sensitivity of company growth to cashflow rises as company size falls, which suggests that SMEs indeed encountered finance constraints that prevented them from fully exploiting their growth potential during the sample period 1996-2000. However, within each size class, quoted firms - even when small - tend to suffer less from finance constraints than unquoted firms.

Suggested Citation

  • Rien Wagenvoort, 2003. "Are finance constraints hindering the growth of SMEs in Europe?," EIB Papers 7/2003, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibpap:2003_007
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    SMEs; Structural financing; Growth-cashflow sensitivities; Financial constraints; growth potential;
    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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