The sensitivity of SME’s investment and employment to the cost of debt financing

Diana Bonfim and Cláudia Custódio

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We use variation in the access to a government credit certification program in Portugal to estimate the sensitivity of SMEs´ investment and employment to the cost of debt financing. Targeted firms have access to a credit certification and loan guarantees. We use a multidimensional regression discontinuity design to estimate real effects. Eligible firms increase borrowing and obtain bank loans at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Eligible firms also exhibit increased return on assets and default less. Industry-level analysis shows reduced heterogeneity in access to credit in more exposed industries.

JEL-codes: A1 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w202115

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