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Examining the Impact of Credit Access on Small Firm Survivability

In: Small Businesses in the Aftermath of the Crisis

Author

Listed:
  • Traci L. Mach

    (Board of Governors of the Federal Reserve System)

  • John D. Wolken

    (Board of Governors of the Federal Reserve System)

Abstract

This paper examines the effects of credit availability on small firm survivability over the period 2004–2008 for non-publicly traded small enterprises. Using data from the 2003 Survey of Small Business Finances, we develop failure prediction models for a sample of small firms that were confirmed to have been in business as of December 2003, with particular attention to the impact of credit constraints. We find that credit constrained firms were significantly more likely to go out of business than non constrained firms. Moreover, credit constraint and credit access variables appear to be among the most important factors predicting which small U.S. firms went out of business during 2004–2008 even though an extensive set of firm, owner, and market characteristics were also included as explanatory factors.

Suggested Citation

  • Traci L. Mach & John D. Wolken, 2012. "Examining the Impact of Credit Access on Small Firm Survivability," Contributions to Economics, in: Giorgio Calcagnini & Ilario Favaretto (ed.), Small Businesses in the Aftermath of the Crisis, edition 127, pages 189-210, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2852-8_10
    DOI: 10.1007/978-3-7908-2852-8_10
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    Citations

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    Cited by:

    1. Martin Pospisil & Jiri Schwarz, 2014. "Bankruptcy, Investment, and Financial Constraints: Evidence from a Post-Transition Economy," Working Papers IES 2014/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2014.
    2. Emmanuel O. Nwosu & Anthony Orji & Vivian Nwangwu & Chioma Nwangwu, 2015. "Is there Discrimination Against Women Entrepreneurs in Formal Credit Markets in Nigeria?," Working Papers PMMA 2015-01, PEP-PMMA.
    3. Yuan, Yan & Rong, Zhao & Xu, Nana & Lu, Yiyang, 2021. "Credit cards and small business dynamics: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    4. Berger, Allen N. & Molyneux, Phil & Wilson, John O.S., 2020. "Banks and the real economy: An assessment of the research," Journal of Corporate Finance, Elsevier, vol. 62(C).
    5. Arthur B. Kennickell & Myron L. Kwast & Jonathan Pogach, 2016. "Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence from the Survey of Consumer Finances," NBER Chapters, in: Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, pages 291-349, National Bureau of Economic Research, Inc.
    6. Keith Barnatchez & Leland D. Crane & Ryan A. Decker, 2017. "An Assessment of the National Establishment Time Series (NETS) Database," Finance and Economics Discussion Series 2017-110, Board of Governors of the Federal Reserve System (U.S.).
    7. Jiří Schwarz & Martin Pospíšil, 2018. "Bankruptcy, Investment, and Financial Constraints: Evidence from the Czech Republic," Eastern European Economics, Taylor & Francis Journals, vol. 56(2), pages 99-121, March.
    8. Agostino, Mariarosaria & Errico, Lucia & Rondinella, Sandro & Trivieri, Francesco, 2023. "Enduring lending relationships and european firms default," Research in Economics, Elsevier, vol. 77(4), pages 459-477.
    9. Mac an Bhaird, Ciarán, 2013. "Demand for debt and equity before and after the financial crisis," Research in International Business and Finance, Elsevier, vol. 28(C), pages 105-117.
    10. Petach, Luke & Weiler, Stephan & Conroy, Tessa, 2021. "It’s a wonderful loan: local financial composition, community banks, and economic resilience," Journal of Banking & Finance, Elsevier, vol. 126(C).
    11. Low, Sarah A., 2017. "Rural Manufacturing Resilience: Factors Associated With Plant Survival, 1996-2011," Economic Research Report 262184, United States Department of Agriculture, Economic Research Service.
    12. Hyun, Junghwan, 2017. "Trade credit behavior of Korean small and medium sized enterprises during the 1997 financial crisis," Journal of Asian Economics, Elsevier, vol. 50(C), pages 1-13.
    13. Arthur B. Kennickell & Myron L. Kwast & Jonathan Pogach, 2015. "Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances," Finance and Economics Discussion Series 2015-39, Board of Governors of the Federal Reserve System (U.S.).

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