The provision of long-term credit and firm growth

Florian Leon

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: This paper investigates whether a higher level of long-term credit provision affects the growth of small and young firms. Firm-level data from more than 20,000 firms in 62 countries are combined with a new hand-collected database on short-term and long-term credit provided to the private sector. Using a difference-in-difference framework, our results indicate that, contrary to short-term credit, long-term credit does not stimulate growth of small and young firms. This finding is, at least partially, explained by the differential impact of short-term and long-term credit provision on small and young firms' access to credit. While the provision of short-term credit alleviates credit constraints faced by small and young firms, a larger provision of long- term bank loans has an opposite impact. Our findings are in line with the hypothesis that an increase of long-term credit provision reects a lender's choice to provide more financing to existing clients (intensive margin) to the detriment of firms without previous access to finance (extensive margin).

Keywords: Long-term finance; firm growth; financial development; credit constraints (search for similar items in EconPapers)
JEL-codes: G21 L25 O16 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/10993/39683 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:19-08

Access Statistics for this paper

More papers in DEM Discussion Paper Series from Department of Economics at the University of Luxembourg Contact information at EDIRC.
Bibliographic data for series maintained by Marina Legrand (marina.legrand@uni.lu).