European SMEs' growth: the role of market-based finance and public financial support: European SMEs' growth: the role of market-based finance and public financial support: Boccaletti et al.
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| Authors: | Boccaletti, Simone1 (AUTHOR) simone.boccaletti@unimib.it, Ferrando, Annalisa2 (AUTHOR) annalisa.ferrando@ecb.europa.eu, Rossi, Emanuele3 (AUTHOR) emanuele.rossi@unimib.it, Rossolini, Monica3 (AUTHOR) monica.rossolini@unimib.it |
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| Source: | Small Business Economics. Feb2025, Vol. 64 Issue 2, p691-727. 37p. |
| Subject Terms: | *Public finance, *Small business, *Financial aid, *Government policy, Public support |
| Abstract: | The study investigates the role of market-based finance and public financial support in aiding scaling up by European SMEs. First, we analyse the impact of public loan guarantee schemes on firms' access to market-based instruments. Second, we study whether firms' access to market-based finance and the use of public grants boost a firm's (ex post) growth. The analysis is based on a unique and original dataset of about 31,000 Eurozone firms in the 2009–2020 period. The study finds that firms' access to market-based finance is (i) driven positively by the previous use of public financial support schemes and (ii) has a positive effect on subsequent growth. In particular, SMEs display relatively higher growth in fixed assets, while for large firms, growth is mainly driven by current assets. Moreover, SME issuers using public grants achieve significantly stronger growth than comparable firms. Plain English Summary: Improving access to market-based finance and public financial support schemes facilitates the scaling up of European SMEs. Public grants enable SMEs to access market-based finance and their subsequent growth. We analyse about 31,000 Eurozone non-financial firms in the period 2009–2020, for which we have information on firms' market-based finance access and their use of public grants. We demonstrate that the joint role of market-based finance and public financial support helps European SMEs scale up. The firms' access to market-based finance is driven positively by the previous use of public financial support schemes and considerably affects subsequent firms' growth. Deepening our analysis, grants-backed SMEs and more informationally opaque firms achieve significantly more robust growth when they issue new equity and bonds than comparable non-grants-backed firms. In sum, our research findings suggest that policymakers should consider all these aspects when establishing their public support policies since adequate access to external market-based finance for SMEs' investments is a crucial factor for the prosperity of SMEs and economic growth. [ABSTRACT FROM AUTHOR] |
| Database: | Entrepreneurial Studies Source |
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| Abstract: | The study investigates the role of market-based finance and public financial support in aiding scaling up by European SMEs. First, we analyse the impact of public loan guarantee schemes on firms' access to market-based instruments. Second, we study whether firms' access to market-based finance and the use of public grants boost a firm's (ex post) growth. The analysis is based on a unique and original dataset of about 31,000 Eurozone firms in the 2009–2020 period. The study finds that firms' access to market-based finance is (i) driven positively by the previous use of public financial support schemes and (ii) has a positive effect on subsequent growth. In particular, SMEs display relatively higher growth in fixed assets, while for large firms, growth is mainly driven by current assets. Moreover, SME issuers using public grants achieve significantly stronger growth than comparable firms. Plain English Summary: Improving access to market-based finance and public financial support schemes facilitates the scaling up of European SMEs. Public grants enable SMEs to access market-based finance and their subsequent growth. We analyse about 31,000 Eurozone non-financial firms in the period 2009–2020, for which we have information on firms' market-based finance access and their use of public grants. We demonstrate that the joint role of market-based finance and public financial support helps European SMEs scale up. The firms' access to market-based finance is driven positively by the previous use of public financial support schemes and considerably affects subsequent firms' growth. Deepening our analysis, grants-backed SMEs and more informationally opaque firms achieve significantly more robust growth when they issue new equity and bonds than comparable non-grants-backed firms. In sum, our research findings suggest that policymakers should consider all these aspects when establishing their public support policies since adequate access to external market-based finance for SMEs' investments is a crucial factor for the prosperity of SMEs and economic growth. [ABSTRACT FROM AUTHOR] |
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| ISSN: | 0921898X |
| DOI: | 10.1007/s11187-024-00918-y |
