Determinants of Access to External Finance: Evidence from Spanish Firms

FRB of San Francisco Working Paper No. 2007-22

42 Pages Posted: 2 Nov 2007

See all articles by Raquel Lago

Raquel Lago

Banco de España

Jesus Saurina Salas

Banco de España

Jose A. Lopez

Federal Reserve Bank of San Francisco

Date Written: September 2007


Access to external finance is a key determinant of a firm's ability to develop, operate and expand. To date, the literature has examined a variety of macroeconomic and microeconomic factors that influence firm financing. In this paper, we examine access by Spanish firms to external financing, both from bank and non-bank sources. We use dynamic panel data estimation techniques to estimate our models over a sample of 60,000 firms during the period from 1992 to 2002. We find that Spanish firms are quite dependent on short-term non-bank financing (such as trade credit), which makes up about 65 percent of total firm debt. Our results indicate that this type of financing is less sensitive to firm characteristics than short-term bank financing. However, we also find that short-term bank debt seems to be accessed more during economic expansions, which may suggest a substitution away from non-bank financing as firm conditions improve. Short-term bank debt also seems to be accessed more as funding rates rise, possibly again suggesting a substitution away from higher-priced non-bank alternatives. Using data from the Spanish Credit Register maintained by the Banco de Espana, we find that the impact of funding costs on access to external financing, whether from banks or non-banks, is affected by the nature of borrowing firms' bank relationships and collateral. In particular, we provide evidence of a potential hold-up problem in loan markets. Moreover, collateral plays a key role in making long-term finance available to firms.

Keywords: external finance, bank relationships, hold-up, business cycle

JEL Classification: E32, G18, G21

Suggested Citation

Lago, Raquel and Saurina Salas, Jesus and Lopez, Jose Antonio, Determinants of Access to External Finance: Evidence from Spanish Firms (September 2007). Available at SSRN: or

Raquel Lago (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

Jesus Saurina Salas

Banco de España ( email )

Madrid 28014

Jose Antonio Lopez

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-977-3894 (Phone)
415-974-2168 (Fax)

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