What Determines the Decision to Apply for Credit? Evidence for Eurozone SMEs
21 Pages Posted: 4 Nov 2012
Date Written: November 3, 2012
This study examines the decision by firm owners to apply, or not, for intermediated debt. Based on a sample of SMEs in 9 European countries over the period 2009-2012, drawing on the ECB SAFE database, we examine firm characteristics, institutional and cultural factors. We focus our analyses on two distinct groups of firms, those that applied for debt and firms that did not apply for fear of rejection. We find evidence that firm age, size and existing debt capacity matter, as do bank and liquidity conditions. We provide evidence for the first time that national culture correlates to the decisions to apply or not for credit. Policy implications of these findings are discussed, with an emphasis on the current ongoing economic crisis.
Keywords: entrepreneurial finance, discouraged borrowers, intermediated debt, financial crisis, Europe, SME Finance
JEL Classification: G32, G3
Suggested Citation: Suggested Citation