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Small Business Economics

Erschienen in:

19.09.2017

Bank debt and trade credit for SMEs in Europe: firm-, industry-, and country-level determinants

verfasst von: Guillaume Andrieu, Raffaele Staglianò, Peter van der Zwan

Erschienen in: Small Business Economics | Ausgabe 1/2018

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Abstract

This paper examines differences in the ability to obtain capital—bank loans and trade credit—between firms, industries, and countries using survey data on European small and medium-sized enterprises (SMEs) from 2009 to 2014. The results show that firm age and firm size are positively linked to SMEs’ access to bank loans, but only firm size is positively related to the provision of trade credit. The results also provide empirical support for a complementary rather than a substitutive effect between bank loans and trade credit. Manufacturing SMEs have a significantly higher likelihood of receiving bank loans and trade credit than non-manufacturing SMEs. We find differences across countries in terms of the relevance of firm age and firm size for obtaining capital. In addition, we point at specific country-level variables that explain why obtaining credit is easier in some countries. We perform additional analyses to confirm our baseline results and provide directions for future research.

Vorheriger Artikel Balanced scorecard in SMEs: effects on innovation and financial performance

Nächster Artikel Survival of entrepreneurship in Spain

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We define “application” as a situation when a firm enters into negotiation with a bank to obtain a loan or with a supplier to obtain a trade credit. However, trade credit negotiations can be informal or formal, because trade credit is characterized by more informal relationships compared with bank loans.

While in this paper we focus on a firm’s access to outside finance, other studies examine other questions related to debt financing. For example, Canton et al. (2013) examine perceived financial flexibility by investigating the expected capacity of a firm to access external financing.

Moral hazard issues occur after the transaction when the agent wants to maximize its own benefits at the expense of the principal (e.g., diverting the funds to bad projects).

Arm’s length financing refers to a situation in which the investor has no other information than public information and a poor capacity to renegotiate a debt contract (e.g., a bondholder).

These samples are a bit smaller than one would expect on the basis of the numbers presented above. This is related to the fact that the question on application success (see below) was not answered or because of missing values for the control variables.

We do not include a continuous specification for age and employees because such a continuous measure is not available for each wave.

Several previous studies include tangibility in examining financial decisions, but this variable was not available. Gompers (1995) shows that tangibility and industry sector are correlated. This implies that industry variables can also be a proxy for the agency problems arising in a firm.

However, our empirical focus is different because García-Teruel and Martínez-Solano (2010) consider the level of trade credit rather than direct experiences with bank loan and trade credit applications.

Additional Wald tests in column 3 of Table 4 reveal that the sum of the coefficients of the age dummy variables and the interaction terms lead to non-significance for age 6–10 and age > 10, and a significant negative coefficient for age 2–5 (p value < 0.10). For trade credit (Column 4) we find significant negative coefficients for age 2–5, age 6–10, and non-significance for age > 10. In sum, there is some evidence that younger SMEs in the manufacturing sector have a higher likelihood of obtaining credit than older SMEs. To further check the robustness of our findings, we provide an analysis by partitioning the sample of firms into non-manufacturing and manufacturing firms. We find that the relationships between firm age/size and application outcomes are weaker in the manufacturing sector than in the non-manufacturing sectors. For reasons of brevity, these results are not tabulated but are available upon request.

In a further analysis, we also consider the relationship between the two types of financing for each country. The results (which are not reported) confirm a positive relation between bank loans and trade credit financing. Too few observations in the panel data were available for each country. This implies that, to obtain an estimate of the relationship, we run a simple regression model with the response variable y as one type of financing and the predictor variable x as the other type of financing in the previous period.

The related survey question on the decision to apply was as follows: “For each of the following ways of financing, could you please indicate whether you applied for them over the past 6 months, or if you did not apply because you thought you would be rejected, because you had sufficient internal funds, or you did not apply for other reasons?”

For brevity, the results for the selection equation (applied yes/no) are not tabulated but are available upon request.

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Titel: Bank debt and trade credit for SMEs in Europe: firm-, industry-, and country-level determinants
verfasst von: Guillaume Andrieu
Raffaele Staglianò
Peter van der Zwan
Publikationsdatum: 19.09.2017
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 1/2018
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-017-9926-y

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