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SMEs’ financing: Divergence across Euro area countries?

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Abstract
This paper studies the divergence/convergence process of European countries as regard the financing behavior of small and medium sized enterprises. Using a firm level and country representative survey, we construct country-time indicators of SMEs’ use of three external financing sources: bank loans, credit line/overdraft and trade credit. These indicators account for composition effects and demand effects. We find substantial differences between countries in the SMEs’ use of the three financing sources. In particular, the cross-country differences related to SMEs’ use of bank loans have significantly increased over the period 2010-2014. This divergence is not related to a global increase in the volatility of this use between countries. Instead, it has been driven by a sharper increase (resp decrease) in the countries where SMEs’ use was initially higher (resp. lower). Finally, we investigate whether SMEs’ uses of financing sources are correlated at the country level with various macroeconomic and banking structure indicators. The results suggest that indicators about banking concentration are good candidates to explain the cross-country divergence of SMEs’ use of bank loans.

Suggested Citation

  • S. Roux & F. Savignac, 2017. "SMEs’ financing: Divergence across Euro area countries?," Working papers 654, Banque de France.
    • Handle: RePEc:bfr:banfra:654
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    References listed on IDEAS

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    More about this item

    Keywords

    credit constraints; bank financing; trade credit; institutional factors.;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G01 - Financial Economics - - General - - - Financial Crises
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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