Financial constraints and productivity: Evidence from euro area companies

Ferrando, Annalisa; Ruggieri, Alessandro

doi:10.1002/ijfe.1615

Cited by 117 publications

(98 citation statements)

References 79 publications

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“…From an empirical viewpoint, existing studies generally confirm that firms in developing countries often cite financial constraints as the main obstacle to their growth [3][4][5][6][7]. However, some evidence suggests that the development of the financial sector may not necessarily lead to a positive outcome in terms of growth for firms [8][9][10][11]. Therefore, it is essential to study the impact of financial accessibility on firm growth, and investigate whether or not firms' access to external finance can improve their performance.…”

Section: Introductionmentioning

confidence: 99%

“…In addition, higher capital intensity and technical progress embodied in new equipment will also have a positive influence on productivity. From the empirical viewpoint, most of the relevant existing studies conclude that better access to finance boosts firms' productivity [11,[13][14][15]. Furthermore, it was shown that many productive firms were not able to expand or make the technological improvements and investments needed to increase their productivity because they have no access to credit [16,17].…”

Section: Introductionmentioning

confidence: 99%

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The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

et al. 2019

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In many developing countries, obtaining financial services at affordable rates and fair terms has been a significant challenge for small and medium enterprises (SMEs). However, this issue has not been paid much attention in Vietnam, even though SMEs account for about 95% of total enterprises and the financial market of the country has not been well developed. This study investigates the causal effects of access to finance on productivity of SMEs operating in the manufacturing sector in Vietnam. Productivity was measured as the total factor productivity (TFP) obtained by production function estimation using the Levinsohn and Petrin approach. Regarding financial accessibility, two factors covered the extent to which firms might have a bank loan or overdraft facility were employed. To study the causal inferences of access to finance on firm productivity, the research adopted the difference-in-differences (DID) approach, as well as the propensity score matching (PSM) coupled with DID technique. The empirical results indicated that improving the financial accessibility could directly enhance firm productivity. Particularly, it was shown that firms having access to a bank loan could significantly improve TFP by approximately 8.6% in the DID model and about 9% in the PSM-DID model. Meanwhile, the firm average TFP increased by approximately 12.3% and 15.7% in simple DID and PSM-DID models, respectively, when firms had an overdraft facility. These findings suggest that the government should put more effort into assisting SMEs in generating bankable projects, and create a sound and healthy financial environment to stimulate firms’ access to finance, which will ensure their sustainability and growth.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

et al. 2019

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“…As pointed out in the previous passage, SMEs face numerous potential constraints that determine SMEs' capability to innovate. Nonetheless, literature tends to focus on the lack of credit as a sole indicator of external constraints [19][20][21][22]. Studies that deal with other types of constraint tend to focus on firms in developed markets [23,24].…”

Section: Introductionmentioning

confidence: 99%

Firm Constraints on the Link between Proactive Innovation, Open Innovation and Firm Performance

Liêm

Khương

Khanh

2019

Journal of Open Innovation: Technology, Market, and Complexity

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This study aims to examine the impacts of firm constraints and proactive innovation on firm performance, using a sample of 3504 small and medium enterprises (SMEs) in Vietnam from 2011–2015. Our findings suggest that technological innovations in general are beneficial to firm performance, increasing firm sales and profits. Further filtering innovations into two categories of proactive and reactive ones, we find that reactive innovation negatively affects firm performance, consistent with the view that proactive entrepreneurial behavior is a highly sought-after characteristic or a valuable resource for a firm as specified in resources-based theory. Finally, our result implies that if firms have low constraint or have sufficient resources, proactive strategies should be the choice if firms seek to improve their performance.

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“…Levine and Warusawitharana (2014) examined firms in four European countries and found a positive relationship between finance and future productivity growth at the firm level. Butler and Cornaggia (2011) found similar evidence that increased productivity is an important channel through which finance affects economic growth (see also Ferrando and Ruggieri 2015). There is also a notion that productivity growth largely takes place at the 6 extensive margin-that is, the creation of new firms and closure of unproductive firms-rather than at the intensive margin, which involves firms becoming more productive internally (Kerr and Ramana 2009).…”

Section: Resultsmentioning

confidence: 80%

Are Oil and Gas Smothering the Private Sector in Trinidad and Tobago?

Khadan¹

2017

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ative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose.No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license. A recent example of this is echoed in the national budget statement for 2017: Diversification… requires that the private sector changes its mindset, from commerce to industry, from focus on the domestic market to seeking to explore global markets, from consuming foreign exchange to earning foreign exchange, from avoiding risks in new ventures and technologies to taking on new risks and facing new competitive pressures to conquer new fields.Such expectations should be grounded in reality and context. Unfortunately, there are no empirical studies on the country's private sector that can provide relevant guidance. Therefore, this report is the first contribution to empirically answering questions related to the performance and challenges facing the private sector in Trinidad and Tobago.Given the sense of urgency expounded for the private sector's enhanced role in supporting economic growth, creating employment, and improving the economic welfare of the nation's citizenry, we find that there is much work to be done. Firm-level performance indicators suggest that the majority of firms are either stagnant or declining. In addition, total factor productivity measured at the firm level is relatively lower in Trinidad and Tobago when compared with other countries in the Caribbean, labour productivity has been declining since the great recession, and private investment is significantly lower than the average for other small commodity-exporting countries. vi ARE OIL AND GAS SMOTHERING THE PRIVATE SECTOR IN TRINIDAD AND TOBAGO?Hence, a concerted policy effort is required to transform Trinidad and Tobago's private sector into an engine of sustainable growth.This study examines factors relating to the profile of firms, macroeconomic conditions, the business climate, and laments of businesspersons as possible constraints to performance. The findings reveal that an unfavorable macroeconomic environment and business climate affects all firms in the private sector. With respect to the former, the main issue relates to an overvalued exchange rate-a negative externality of being hydrocarbon-dependent. An unfavorable business climate reflects government policies, regulations, and public services that hinder rather than promote a dynamic, export-oriented and innovative private sector. Moreover, th...

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Financial constraints and productivity: Evidence from euro area companies

Cited by 117 publications

References 79 publications

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

Firm Constraints on the Link between Proactive Innovation, Open Innovation and Firm Performance

Are Oil and Gas Smothering the Private Sector in Trinidad and Tobago?

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