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What determines the decision to apply for credit? Evidence for Eurozone SMEs

Brian Lucey, School of Business Trinity College Dublin
Javier Sanchez-Vidal, Universidad de Cartagena
Ciaran MacAnBhaird, FIONTAR, Dublin City University
Constantin Gurdgiev, School of Business Trinity College Dublin

IIIS Discussion Paper No. 415


This study examines the decision by firm owners to apply, or not, for intermediated debt. Based on a sample of SMEs in 9 European countries over the period 2009-2012, we examine firm characteristics, institutional and cultural factors. We focus our analyses on two distinct groups of firms, those that applied for debt and firms that did not apply for fear of rejection. We find evidence that firm age, size and existing debt capacity matter, as do bank and liquidity conditions. We provide evidence for the first time that national culture correlates to the decisions to apply or not for credit. Policy implications of these findings are discussed, with an emphasis on the current ongoing economic crisis.

Last updated 28 August 2014 by IIIS (Email).