 Not All Outcomes Are Equal: Financial Constraints and Firm-Level AdjustmentsMPRA Paper from University Library of Munich, Germany Abstract: This study estimates the causal impact of financial constraints on Finnish SMEs using 68,000 survey observations (2016–2024) linked to tax registry data. Applying propensity score matching with extensive balance checks and multiple-testing control, I examine six outcomes: turnover, employment, investment, profitability, solvency, and innovation. Financial constraints sharply increase the likelihood of adverse outcomes: solvency and profitability risks rise by up to 29%, and the probability of improvement falls by up to 4 percentage points. Registry-based analysis confirms considerably lower taxable income growth. Heterogeneity analysis reveals a dual mechanism: micro firms suffer liquidity shocks, while mid-sized firms cut jobs and investment. These findings underscore the need for differentiated credit policies, rapid-access liquidity support for micro firms and adapted investment financing for growth-oriented mid-sized SMEs, and offer actionable insights for SME managers, including the importance of precautionary cash buffers, proactive relationship banking, and early financing commitments. Keywords: credit constraints; financing; impact analysis; propensity score matching (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128615 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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