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Credit constraints in European SMEs: does regional institutional quality matter?

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  • Roberto Ganau
  • Andrés Rodríguez-Pose

Abstract

We analyse the investment-to-cash flow relationship in Europe using a sample of manufacturing small- and medium-sized enterprises (SME) over the period 2009–2016. We investigate the effect of regional institutional quality on the investment-to-cash flow sensitivity, finding that, although credit constraints remain a serious problem for European SMEs, high-quality regional institutions contribute to mitigate the dependency on internally-generated resources to finance new investments. Improvements in local institutional quality can therefore facilitate SMEs’ access to credit – e.g. through inter-firm trade credit relationships –, but are insufficient to overcome the credit restrictions faced by European SMEs.

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  • Roberto Ganau & Andrés Rodríguez-Pose, 2022. "Credit constraints in European SMEs: does regional institutional quality matter?," Applied Economics Letters, Taylor & Francis Journals, vol. 29(15), pages 1388-1392, September.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:15:p:1388-1392
    DOI: 10.1080/13504851.2021.1934385
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    Cited by:

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    2. Bettiol, Marco & Capestro, Mauro & Di Maria, Eleonora & Ganau, Roberto, 2024. "Is this time different?: how Industry 4.0 affects firms' labor productivity," LSE Research Online Documents on Economics 124545, London School of Economics and Political Science, LSE Library.

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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