Small Firms, Corruption, and Demand for Credit. Evidence from the Euro Area

Emma Galli, Danilo V. Mascia and Stefania P. S. Rossi

International Business Research, 2017, vol. 10, issue 11, 158-174

Abstract: In this paper, we aim to assess how the quality of the institutional environment – identified according to the level of corruption perceived in a country – may affect the access to credit for micro, small, and medium-sized enterprises (MSMEs). Based on a sample of 68,115 observations – drawn from the ECB-SAFE survey – related to MSMEs chartered in 11 euro area countries, we investigate whether the level of corruption affects their demand for bank loans during the period 2009–2014. Overall, we find that the degree of corruption seems to play a role in the applications for bank loans when small firms are under investigation. Interestingly, results highlight that small businesses chartered in highly corrupt countries face a greater probability of self-restraint regarding their loan applications (about 7.4%) than small firms located in low-corruption economies (around 6%). The results are robust to various model specifications and econometric methodologies. Our findings suggest that anti-corruption policies and measures enhancing transparency in the economy may be crucial in reducing the negative spillovers generated by a low-quality institutional environment on the access to credit by small firms.

Keywords: credit access; bank loans; MSMEs; corruption (search for similar items in EconPapers)
JEL-codes: D73 G20 G21 G30 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ccsenet.org/journal/index.php/ibr/article/view/71248/39063 (application/pdf)
http://www.ccsenet.org/journal/index.php/ibr/article/view/71248 (text/html)

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:ibn:ibrjnl:v:10:y:2017:i:11:p:158-174

Access Statistics for this article

More articles in International Business Research from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().