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SME Financing Conditions in Europe: Credit Crunch or Fundamentals?

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  • Holton, Sarah
  • Lawless, Martina
  • McCann, Fergal

Abstract

Cross-country divergence in credit availability to Small and Medium Enterprises (SMEs) has been a salient feature of the recent Euro Area economic crisis. This paper uses firm level and macroeconomic data to identify heterogeneity in SME credit conditions within the Euro Area since 2009. By taking account of differences in firm quality and in the risk-free interest rate, we use remaining residual differences in credit supply conditions to identify a ‘credit crunch’. We investigate whether macroeconomic conditions such as real economy growth and private sector leverage can explain these residual credit crunches, finding that banks respond to these factors when allocating credit to SMEs. The analysis allows identification of economies where credit conditions appear both unexpectedly restrictive and accommodative.

Suggested Citation

  • Holton, Sarah & Lawless, Martina & McCann, Fergal, 2013. "SME Financing Conditions in Europe: Credit Crunch or Fundamentals?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 225, pages 52-67, August.
    • Handle: RePEc:cup:nierev:v:225:y:2013:i::p:r52-r67_14
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    Cited by:

    1. Harrison, Richard & Li, Youwei & Vigne, Samuel A. & Wu, Yuliang, 2022. "Why do small businesses have difficulty in accessing bank financing?," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Marie Finnegan & Supriya Kapoor, 2023. "ECB unconventional monetary policy and SME access to finance," Small Business Economics, Springer, vol. 61(3), pages 1253-1288, October.
    3. Céline Antonin & Christophe Blot & Sabine Le Bayon & Danielle Schweisguth, 2013. "La zone euro écartelée. Perspectives 2013-2014 pour l'économie européenne," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(4), pages 53-95.
    4. Dumitru Ionuţ & Dumitru Ionela, 2024. "Are Firms from European Union Financially-Stressed Countries More Credit Constrained?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 18(1), pages 120-129.

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