SMEs’ Financing: Divergence Across Euro Area Countries?

47 Pages Posted: 4 Jan 2018

See all articles by Sébastien Roux

Sébastien Roux

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Frederique Savignac

University Paris-Est Créteil (UPEC)

Date Written: December 1, 2017

Abstract

This paper studies the divergence/convergence process of European countries as regard the financing behavior of small and medium sized enterprises. Using a firm level and country representative survey, we construct country-time indicators of SMEs’ use of three external financing sources: bank loans, credit line/overdraft and trade credit. These indicators account for composition effects and demand effects. We find substantial differences between countries in the SMEs’ use of the three financing sources. In particular, the cross-country differences related to SMEs’ use of bank loans have significantly increased over the period 2010-2014. This divergence is not related to a global increase in the volatility of this use between countries. Instead, it has been driven by a sharper increase (resp decrease) in the countries where SMEs’ use was initially higher (resp. lower). Finally, we investigate whether SMEs’ uses of financing sources are correlated at the country level with various macroeconomic and banking structure indicators. The results suggest that indicators about banking concentration are good candidates to explain the cross-country divergence of SMEs’ use of bank loans.

Keywords: credit constraints, bank financing, trade credit, institutional factors

JEL Classification: G31, G01, D22, C35

Suggested Citation

Roux, Sébastien and Savignac, Frederique, SMEs’ Financing: Divergence Across Euro Area Countries? (December 1, 2017). Banque de France Working Paper No. 654, Available at SSRN: https://ssrn.com/abstract=3095517 or http://dx.doi.org/10.2139/ssrn.3095517

Sébastien Roux

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Frederique Savignac (Contact Author)

University Paris-Est Créteil (UPEC) ( email )

61 avenue du General de Gaulle
Creteil cedex, 94010
France

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