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File name: SSRN-id1300522. ; Size: 253K
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Bank Lending, Financing Constraints and SME Investment
Francisco Rodríguez-Fernández
University of Granada - Department of Economic Theory and History
Gregory F. Udell
Indiana University Bloomington - Department of Finance
Santiago Carbo-Valverde
Bangor Business School
November 12, 2008
21st Australasian Finance and Banking Conference 2008 Paper
Abstract:
Investment opportunities depend on the level of financing constraints. Earlier research has mainly focused on the controversial argument that cash flow-investment correlations increase with the level of these constraints. We side-step this controversy by focusing on bank loans rather than cash flow based on the argument that access to bank lending reduces financing constraints. We also focus on a subset of firms that are likely more vulnerable to financing constraints, small and mid-sized enterprises. Our results show that bank loans predict investment for unconstrained firms, but not for constrained firms, and trade credit predicts investment, but only for constrained firms.
Number of Pages in PDF File: 41
Keywords: SMEs, financing constraints, bank lending, trade credit, predictability
JEL Classification: G21, D21, L16
working papers series
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Date posted: September 10, 2008
; Last revised: November 16, 2008
Suggested CitationRodríguez-Fernández, Francisco, Udell, Gregory F. and Carbo-Valverde, Santiago, Bank Lending, Financing Constraints and SME Investment (November 12, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: http://ssrn.com/abstract=1247282 or http://dx.doi.org/10.2139/ssrn.1247282
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