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Sources of SMEs Financing and Their Impact on Economic Growth across the European Union: Insights from a Panel Data Study Spanning Sixteen Years

Author

Listed:
  • Larissa M. Batrancea

    (Department of Business, Babeş-Bolyai University, 7 Horea Street, 400174 Cluj-Napoca, Romania)

  • Mehmet Ali Balcı

    (Department of Mathematics, Muğla Sıtkı Koçman University, Muğla 48000, Turkey)

  • Leontina Chermezan

    (Department of Economics and Business Administration, Babeş-Bolyai University, 58–60 Teodor Mihali Street, 400591 Cluj-Napoca, Romania)

  • Ömer Akgüller

    (Department of Mathematics, Muğla Sıtkı Koçman University, Muğla 48000, Turkey)

  • Ema Speranta Masca

    (Faculty of Economics and Law, “George Emil Palade” University of Medicine, Pharmacy, Science and Technology of Targu Mures, 38 Gheorghe Marinescu Street, 540566 Targu Mures, Romania)

  • Lucian Gaban

    (Faculty of Economics, “1 Decembrie 1918” University of Alba Iulia, 15–17 Unirii Street, 510009 Alba Iulia, Romania)

Abstract

Getting access to sufficient funding is the keystone for the development of any business, but especially for small and medium enterprises (SMEs). These economic entities are crucial players in the global economy since they include almost 90% of companies, provide jobs for nearly 50% of the global workforce, and enhance long-term economic growth. In this context, our study explores important sources concerning the financing of small and medium enterprises and their impact on economic growth during the period 2005–2020 with data from SMEs covering the 28 countries belonging to the European Union. The set of predictors included Strength of legal rights index, Days sales outstanding, Bad debt loss, Interest rate, Bank support, Business angels, Private lenders, and Public support. The set of dependent variables included Cost of loans, Equity fund, GDP growth rate, and Value added growth rate. Our methodological approach was complex, it considered a panel data analysis with a first-difference generalized method of moments estimator and a multiplex time series analysis. The novelty of the study resides in combining the two methods in order to investigate significant drivers of economic growth across the EU. Empirical results showed that economic growth was mainly triggered by predictors such as Interest rate, Business angels, Bank support, and Public support. Moreover, the valuable mathematical insights elicited by the multiplex time series analysis suggested that European economies cooperated intensively through SME activities. Based on our empirical results, national and regional authorities should enact adequate policies to support business endeavors of small and medium enterprises.

Suggested Citation

  • Larissa M. Batrancea & Mehmet Ali Balcı & Leontina Chermezan & Ömer Akgüller & Ema Speranta Masca & Lucian Gaban, 2022. "Sources of SMEs Financing and Their Impact on Economic Growth across the European Union: Insights from a Panel Data Study Spanning Sixteen Years," Sustainability, MDPI, vol. 14(22), pages 1-18, November.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:22:p:15318-:d:976509
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    2. Bing Wang & Wenjie Bi & Haiying Liu, 2023. "Dynamic Pricing with Parametric Demand Learning and Reference-Price Effects," Mathematics, MDPI, vol. 11(10), pages 1-14, May.
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    4. Jose E. Gomez-Gonzalez & Sebastian Sanin-Restrepo & Cesar E. Tamayo & Oscar M. Valencia, 2023. "Bank market power and firm finance: evidence from bank and loan-level data," Economic Change and Restructuring, Springer, vol. 56(6), pages 4629-4660, December.
    5. Ogochukwu Christiana Anyanwu & Sunday Emeka Oloto & Victor Chukwunweike Nwokocha, 2023. "Impact of strategic alliance on the innovation of women-owned enterprises in Nigeria," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    6. Emilia Herman & Kinga-Emese Zsido, 2023. "The Financial Sustainability of Retail Food SMEs Based on Financial Equilibrium and Financial Performance," Mathematics, MDPI, vol. 11(15), pages 1-26, August.
    7. Pejman Peykani & Mostafa Sargolzaei & Mohammad Hashem Botshekan & Camelia Oprean-Stan & Amir Takaloo, 2023. "Optimization of Asset and Liability Management of Banks with Minimum Possible Changes," Mathematics, MDPI, vol. 11(12), pages 1-24, June.

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