Does the Financial Crisis Change the Effect of Financing on Investment? Evidence From Private SMEs

38 Pages Posted: 27 Jan 2020

See all articles by Siraz Zubair

Siraz Zubair

University of Twente

Rezaul Kabir

University of Twente - Department of Finance and Accounting

Xiaohong Huang

University of Twente - Department of Finance & Accounting

Date Written: September 30, 2019

Abstract

The paper examines the real effects of the financial crisis for private firms. Analyzing a novel dataset from the Netherlands and controlling for multiple key factors, we find that investments of small and medium-sized private enterprises reduced significantly during and after the financial crisis. We find that both internal and external financing sources had a significant positive relationship with investment during the pre-crisis and post-crisis periods. But, during the crisis period, internal finance became significantly less influential on investment compared to external finance. The findings of the study suggest that borrowing from banks played a more prominent role in determining the investments of SMEs during the financial crisis of 2008-2009.

Keywords: Financing; Investment; Financial crisis; SMEs; Private firms

JEL Classification: G01; G21; G32; D22.

Suggested Citation

Zubair, Siraz and Kabir, Rezaul and Huang, Xiaohong, Does the Financial Crisis Change the Effect of Financing on Investment? Evidence From Private SMEs (September 30, 2019). Available at SSRN: https://ssrn.com/abstract=3514579 or http://dx.doi.org/10.2139/ssrn.3514579

Siraz Zubair

University of Twente ( email )

Netherlands

Rezaul Kabir (Contact Author)

University of Twente - Department of Finance and Accounting ( email )

Faculty of Behavioral, Management & Social Science
P. O. Box 217
Enschede, 7500 AE
Netherlands
+31 53 489 5477 / 5355 (Phone)

HOME PAGE: http://https://people.utwente.nl/r.kabir

Xiaohong Huang

University of Twente - Department of Finance & Accounting ( email )

P.O.Box 217
7500 AE Enschede
Netherlands

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