DP12006 Suitable or non-suitable? An investigation of Eurozone SME access to market-based finance

Author(s): Paola Bongini, Annalisa Ferrando, Emanuele Rossi, Monica Rossolini
Publication Date: April 2017
Keyword(s): Eurozone, market-based finance, SMEs
JEL(s): G10, G32, L25, L26
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12006

The present paper provides in-depth analysis of SME access to capital markets among Eurozone countries. First, we detect the factors - at the firm and country level - that are able to influence the likelihood of SME access to market-based finance. Second, we construct an index of what we call "market suitability",, i.e., a score that can be measured at the dimensional, sectoral and national level, which provides the percentage of firms potentially fit for market-based finance. Our results highlight that a few Eurozone countries seem to have deployed the "potential" for capital market financing, while there exists a large percentage of unexploited potential for firms fit for market-based finance. It should also be highlighted that overall business conditions - measured by GDP growth, the degree of development of domestic financial markets, and the quality of the legal and judicial enforcement system - greatly influence a firm's market suitability. In the period under consideration (2000-2014), macro factors tended to reduce the likelihood of SME access to market-based finance in most countries in our sample