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Small Firms, Finance Gaps and Venture Capital

Listed author(s):
  • Gavin C. Reid

Exploratory data analysis on a new small firms database is reported upon. It emphasis statistical explanations of whether or not small firms experience funding shortages. Univariate probit estimators of the probability of experiencing funding shortages are reported upon. Control variables were grouped into three types: conventional economic (e.g. sales); attitudinal economic (e.g. attitude to easier trade credit); and technical (e.g. sectoral dummies). Several conventional economic variables had significant effects of which the most notable was part-time employment. A ten per cent increase in part-time employment reduces the probability of experiencing funding shortages by two and a half per cent. Some attitudinal variables were found to be important (e.g. easier trade credit). Regional effects were discovered but sectoral effects were not. Finally, multivariate probits are reported upon, and shown to be consistent with univariate probits. They indicate significant cross equation error correlations, but the general results of the univariate probits are substantiated

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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 9208.

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Date of creation: Aug 1992
Handle: RePEc:san:crieff:9208
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