Heterogeneity and state dependence in firms’ access to credit: Microevidence from the euro area

Gabriele Angori () and David Aristei
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Gabriele Angori: Università degli Studi di Ferrara

No 220, SEEDS Working Papers from SEEDS, Sustainability Environmental Economics and Dynamics Studies

Abstract: Using detailed firm-level longitudinal data, this paper analyses the main factors affecting firms’ access to bank credit in eleven euro area countries over the period 2014-2018. We focus on firms’ loan demand behaviour and on banks’ actual credit granting decision, using alternative measures of financing constraints and controlling for endogenous sample selection and individual heterogeneity. Furthermore, we explicitly analyse the dynamics of firms’ access to credit and account for state dependence in loan demand and credit rationing probabilities. Empirical results show that small and informationally opaque businesses, with deteriorated public support and credit history, experience greater difficulties in accessing to bank loans. Moreover, we provide evidence of significant state dependence in access to credit over time. In particular, firms having already experienced credit restrictions in the past are more likely to face further financing constraints, while enterprises that repeatedly recur to external financing seem to have an easier access to credit. Finally, focusing on the subset of firms that actually need bank financing, we find that previous credit restrictions significantly reduce current demand probability, thus providing evidence of a significant credit discouragement effect.

Keywords: Access to credit; Financing constraints; State dependence; Sample selection; Unobserved heterogeneity; Panel data (search for similar items in EconPapers)
JEL-codes: C23 C34 D22 G21 G32 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2020-02, Revised 2020-02
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-eur, nep-fdg and nep-sbm
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http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0220.pdf First version, 2020 (application/pdf)
http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0220.pdf Revised version, 2020 (application/pdf)

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