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How do banks screen innovative firms? Evidence from start-up panel data

Martin Brown (), Hans Degryse (), Daniel Höwer and María Fabiana Penas
Authors registered in the RePEc Author Service: Daniel Hoewer

No 12-032, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Start-up firms often face difficulties in raising external funds. Employing a unique panel dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups are less likely to use bank finance and face more difficulties in raising bank finance than low-tech start-ups. We find that external credit scores do affect the availability of credit for start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm's industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size.

Keywords: Innovation; Start-up; Credit information sharing; Soft information (search for similar items in EconPapers)
JEL-codes: G2 G18 O16 P34 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban, nep-cta, nep-ent and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12032

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