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Does firm size really affect the outcome of loan applications?

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  • Mallik, Girijasankar
  • Nguyen, Duc Nguyen
  • Chowdhury, Anis

Abstract

Based on cross-country survey data comprising more than 100,000 firm-year observations across 139 countries, we use a multinomial logit model to investigate the determinants of firms’ access to finance and why “needy” firms are discouraged from applying for bank loans. We find that the relationship between applying for a loan and firm size is non-linear. Further, we document evidence that growing firms need and apply for funds up to a certain threshold and are less likely to be discouraged.

Suggested Citation

  • Mallik, Girijasankar & Nguyen, Duc Nguyen & Chowdhury, Anis, 2022. "Does firm size really affect the outcome of loan applications?," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 806-820.
    • Handle: RePEc:eee:ecanpo:v:74:y:2022:i:c:p:806-820
    DOI: 10.1016/j.eap.2022.04.004
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    More about this item

    Keywords

    Access to finance; SMEs; Borrower discouragement; Heckman; Multinomial logit;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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