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

Roberto Ganau and Andrés Rodríguez-Pose

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: credit constraints; small- and medium-sized firms; manufacturing industry; institutional quality; Europe (search for similar items in EconPapers)
JEL-codes: C23 R50 (search for similar items in EconPapers)
Pages: 5 pages
Date: 2022-09-02
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-sbm and nep-ure
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Published in Applied Economics Letters, 2, September, 2022, 29(15), pp. 1388-1392. ISSN: 1350-4851

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Journal Article: Credit constraints in European SMEs: does regional institutional quality matter? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:112487

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