Credit constraints in European SMEs: does regional institutional quality matter?

Roberto Ganau and Andrés Rodríguez-Pose

Applied Economics Letters, 2022, vol. 29, issue 15, 1388-1392

Abstract: We analyse the investment-to-cash flow relationship in Europe using a sample of manufacturing small- and medium-sized enterprises (SME) over the period 2009–2016. We investigate the effect of regional institutional quality on the investment-to-cash flow sensitivity, finding that, although credit constraints remain a serious problem for European SMEs, high-quality regional institutions contribute to mitigate the dependency on internally-generated resources to finance new investments. Improvements in local institutional quality can therefore facilitate SMEs’ access to credit – e.g. through inter-firm trade credit relationships –, but are insufficient to overcome the credit restrictions faced by European SMEs.

Date: 2022
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DOI: 10.1080/13504851.2021.1934385

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