Does financial development really spur nascent entrepreneurship in Europe? — A panel data analysis

Brahim Gaies, Dorra Najar, Adnane Maalaoui, Sascha Kraus and Ayman El Tarabishy

Journal of Small Business Management, 2023, vol. 61, issue 6, 2440-2487

Abstract: After the global crisis, European governments have stressed the importance of financing new ventures. Nevertheless, the existing literature provides little information on the extent to which financial development drives new businesses. Using panel data on 22 European economies between 2009 and 2017, this study fills this gap by providing evidence of a U-shaped relationship between financial deepening and nascent entrepreneurship. This implies that without a high level of financial deepening, the banking sector only favors established businesses at the expense of nascent entrepreneurship. The study also shows that banking intermediation and venture capital do not really encourage new businesses at the macro level, whereas financial stability does.

Date: 2023
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DOI: 10.1080/00472778.2021.1896722

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