Young Enterprises and Bank Credit Denials

Danilo V. Mascia ()

Working Papers from eSocialSciences

Abstract: By employing a sample of 20,956 observations of non-financial SMEs headquartered in the Euro area, between 2009 and 2015, the paper tests whether young businesses are more likely to face credit rejections from lenders than their older peers. The findings appear to confirm our suspicions that new enterprises consistently experience higher denials from banks compared to more established businesses. Such a result is stable to different model specifications and is also confirmed once it handles the issue of sample selection bias potentially affecting our data. Additional tests also reveal that credit constraints are particularly difficult for young SMEs located in Southern and Central Europe, as well as for those operating in the “Trade†industry. Overall, our evidence suggests that actions from the policy maker could be desirable to support the viability of credit and, thus, ensure the growth of young businesses in the Euro area.

Keywords: eSS; SMEs; young enterprises; bank loans; credit rationing; non-financial; credit rejections; model specifications; higher denials; bank credit denials; sample selection; trade; industry; policy makers; credit; Euro area. (search for similar items in EconPapers)
Date: 2018-06
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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