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http://ssrn.com/abstract=1247282
 
 

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Bank Lending, Financing Constraints and SME Investment


Francisco Rodriguez-Fernandez


University of Granada - Department of Economic Theory and History

Gregory F. Udell


Indiana University - 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 Citation

Rodriguez-Fernandez, Francisco and 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

Contact Information

Francisco Rodriguez-Fernandez
University of Granada - Department of Economic Theory and History ( email )
Granada
Spain
Gregory F. Udell
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
Santiago Carbo-Valverde (Contact Author)
Bangor Business School ( email )
Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom
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