Access to Bank Financing and New Investment: Evidence from Europe

Part of the Contributions to Economics book series (CE)


In this paper we study the relationship between firm age, the use of external finance and new investment decisions, in a sample of European firms. We find that younger firms use less bank financing than older firms only in non-EU countries, suggesting that greater financial development and a stronger investment climate offers young firms greater access to bank financing. Next, we show a link between a firm’s ability to obtain a loan and make new investments. Furthermore, we find that firms that report a need for credit, but did not apply for a loan, have the lowest incidence and amount of investment. Our results highlight the important role that the business environment can play in supporting wider access to external finance and greater private sector investment.


Banking Sector Full Time Employee Trade Credit Young Firm External Finance 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Larry W. Chavis
    • 1
  • Leora F. Klapper
    • 2
  • Inessa Love
    • 2
  1. 1.Kenan–Flagler Business SchoolUniversity of North Carolina at Chapel HillChapel HillUSA
  2. 2.The World BankDevelopment Research GroupWashingtonUSA

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