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Access to Bank Financing and New Investment: Evidence from Europe

THE ECONOMICS OF SMALL BUSINESSES: AN INTERNATIONAL PERSPECTIVE, Giorgio Calcagnini and Ilario Favaretto, eds., Springer Publishing, 2010

25 Pages Posted: 28 Sep 2010  

Larry W. Chavis

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Inessa Love

World Bank - Development Economics Data Group (DECDG)

Date Written: April 10, 2010

Abstract

In this paper we study the relationship between firm age, the use of external finance and new investment decisions, in a sample of European firms. We find that younger firms use less bank financing than older firms only in non-EU countries, suggesting that greater financial development and a stronger investment climate offers young firms greater access to bank financing. Next, we show a link between a firm’s ability to obtain a loan and make new investments. Furthermore, we find that firms that report a need for credit, but did not apply for a loan, have the lowest incidence and amount of investment. Our results highlight the important role that the business environment can play in supporting wider access to external finance and greater private sector investment.

Keywords: Access to Finance, Debt Market, Banks & Banking Reform, Financial Intermediation

JEL Classification: G32, H32, O16

Suggested Citation

Chavis, Larry W. and Klapper, Leora F. and Love, Inessa, Access to Bank Financing and New Investment: Evidence from Europe (April 10, 2010). THE ECONOMICS OF SMALL BUSINESSES: AN INTERNATIONAL PERSPECTIVE, Giorgio Calcagnini and Ilario Favaretto, eds., Springer Publishing, 2010. Available at SSRN: https://ssrn.com/abstract=1677453

Larry W. Chavis (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-8215 (Phone)
919-962-7186 (Fax)

HOME PAGE: http://www.unc.edu/~chavisl

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Inessa Love

World Bank - Development Economics Data Group (DECDG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/ilove

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