What finance for what investment? Survey-based evidence for European companies

  • Annalisa Ferrando
  • Carsten Preuss


We examine the link between corporate financing and investment decisions of European firms by using a novel firm-level survey of the European Investment Bank. The survey provides rich quantitative information of a wide range of financing sources and tangible and intangible investment types for a representative sample of EU28 firms in 2016. We provide new evidence and contribute to previous research in the following ways: first we consider the heterogeneous effect of internal and external finance on different tangible and intangible investment types. Second, our analysis focuses on a broad spectrum of non-financial corporations across size classes from different countries. By using a multinomial fractional response model to estimate the finance-investment link, we find that SMEs and large enterprises show a different financing behaviour for their investment activity. The results suggest that SMEs’ tangible asset investment is positively related to the use of bank finance, whereas internal finance is preferred for intangible asset investments.


Tangible and intangible investment Internal and external finance R&D investment SME finance Multivariate fractional response model 

JEL Classification

D22 E22 G32 L25 



We would like to thank Debora Revoltella, Maarten Buis, Rozalia Pal, the participants at the ECB workshop “Euro area business investment in a global context—the role of cyclical and structural factors and frictions” and at the International Conference on Small Businesses, Banks, Finance, Innovation and Growth 2017, and two anonymous referees for highly valuable suggestions and comments. This research was conducted while the authors were visiting the European Investment Bank, whose hospitality and support are gratefully acknowledged. All errors and omissions remain our own. The views expressed do not necessarily reflect those of the European Investment Bank and of the European Central Bank.


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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.European Central BankFrankfurt am MainGermany

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