What Determines the Decision to Apply for Credit? Evidence for Eurozone SMEs

Abstract

This study examines the decision by firm owners to apply, or not, for intermediated debt. Based on a sample of SMEs in 9 European countries over the period 2009-2012, we examine firm characteristics, institutional and cultural factors, along with time, industry and year variables. We focus our analyses in two distinct groups of firms, those that applied for debt and firms that did not apply for fear of rejection. We find evidence that firm age, size and existing debt capacity matter, as do bank and liquidity conditions. We provide evidence for the first time that national culture correlates to the decisions to apply or not for credit. Policy implications of these findings are discussed.