No abstract

Using a novel measure of relationship lending based on the kind of information banks use to assess borrowers, we investigate the role of relationship lending in firms’ capital structure. Using a unique dataset of European manufacturing firms, we measure relationship lending based on three dimensions (closeness, soft information, exclusivity) and relate them to firms’ leverage. Overall our results support the hypothesis that supply factors matter. We find that the actual use of soft information increases leverage and only firms without soft information‐intensive relationships increase their leverage through multiple relationships. However, the effect of relationship lending on leverage varies across countries.

The European Union introduced a directive aimed at reducing trade credit due to its supposedly negative effect on the European economy. This contrasts with the redistribution view arguing that trade credit could facilitate the financing of credit‐constrained firms by more liquid suppliers. But does trade credit mainly flow from relatively unconstrained suppliers to more financially constrained buyers? To answer this question, we look at the characteristics of net borrowers with respect to net lenders and then estimate the substitutability between trade and bank debt separately for the two groups of firms. Overall, the results show that, in Italy, efficient redistribution does not tend to prevail in the trade credit market.

We study the impact of measures devoted to relieving financial constraints for the growth and survival of Italian innovative start‐ups. Using balance sheet data on innovative start‐ups and information on the use of the Italian Central Guarantee Fund for small and medium‐sized enterprises, we evaluate whether access to the fund, relieving financial constraints, helps innovative start‐ups survive and grow. We find innovative start‐ups benefit significantly more than similar control firms. We shed light on the relevance of policies aimed at reducing financial constraints for the growth and survival of innovative start‐ups, an issue receiving increasing attention at the European level.

Although lease financing provides a significant source of funds enabling many companies to invest, few studies examine the determinants of leasing in Continental Europe and we are aware of no study on the Italian case. This paper investigates the relationship between financial constraints and leasing decisions for a sample of Italian firms. In particular, it investigates the determinants of firm leasing decisions, the degree of substitutability between leasing and debt, and the impact of leasing on the probability of firms feeling ‘credit rationed’. Our results support the hypothesis that leasing preserves capital, thus helping to relieve credit constraints.