Financial Constraints, Newly Founded Firms and the Financial Crisis

29 Pages Posted: 21 Dec 2017

See all articles by Julia Hirsch

Julia Hirsch

Universidad Autónoma de Querétaro

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Goethe University Frankfurt - Research Center SAFE

Date Written: December 20, 2017

Abstract

This paper aims to analyze the effects of financial constraints and the financial crisis on the financing and investment policies of newly founded firms. Thereby, the analysis adds important new insights on a crucial segment of the economy. We make use of a large and comprehensive data set of French firms founded in the years 2004-2006, i.e. well before the financial crisis. Our panel data analysis shows that the global financial crisis imposed a shock (mostly demand-driven) on the financing as well as on the investments of these firms. Moreover, we find that financially constrained firms use less external debt financing and invest smaller amounts. They also rely on less trade credit. With regard to bank financing, newly founded firms which are more financially constrained accumulate less bank debt and repay initial bank debt slower than their non-financially constraint counterparts. Finally, we find that financially constrained firms are affected to a smaller degree by the financial crisis than their less financially constrained counterparts.

Keywords: financial constraints, financial crisis, financing decisions, investment decisions, newly founded firms

JEL Classification: D92, G32

Suggested Citation

Hirsch, Julia and Walz, Uwe, Financial Constraints, Newly Founded Firms and the Financial Crisis (December 20, 2017). SAFE Working Paper No. 191. Available at SSRN: https://ssrn.com/abstract=3090877 or http://dx.doi.org/10.2139/ssrn.3090877

Julia Hirsch

Universidad Autónoma de Querétaro ( email )

Cerro de las Campanas S/N, Las Campanas
Queretaro, 76010
Mexico

Uwe Walz (Contact Author)

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
50
Abstract Views
394
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information