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Are finance constraints hindering the growth of SMEs in Europe?

  • Wagenvoort, Rien

    ()

    (European Investment Bank, Economic and Financial Studies)

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    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.

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    File URL: http://www.eib.org/attachments/efs/eibpapers/eibpapers_2003_v08_n02_en.pdf#page=22
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    Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 7/2003.

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    Length: 29 pages
    Date of creation: 09 Jun 2003
    Date of revision:
    Handle: RePEc:ris:eibpap:2003_007
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    1. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank.
    2. Jeffrey H. Nilsen, 1999. "Trade Credit and the Bank Lending Channel," Working Papers 99.04, Swiss National Bank, Study Center Gerzensee.
    3. Jappelli, Tullio & Pagano, Marco, 2002. "Information sharing, lending and defaults: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 26(10), pages 2017-2045, October.
    4. Fazzari, Steven M & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Investment, Financing Decisions, and Tax Policy," American Economic Review, American Economic Association, vol. 78(2), pages 200-205, May.
    5. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
    6. Hinloopen, Jeroen & Wagenvoort, Rien, 1997. "On the computation and efficiency of a HBP-GM estimator some simulation results," Computational Statistics & Data Analysis, Elsevier, vol. 25(1), pages 1-15, July.
    7. Steven N. Kaplan & Luigi Zingales, 2000. "Investment-Cash Flow Sensitivities Are Not Valid Measures Of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 707-712, May.
    8. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
    9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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