Financial constraints, newly founded firms and the financial crisis

  • This paper aims to analyze the effects of financial constraints and the financial crisis on the financing and investment policies of newly founded firms. Thereby, the analysis adds important new insights on a crucial segment of the economy. We make use of a large and comprehensive data set of French firms founded in the years 2004-2006, i.e. well before the financial crisis. Our panel data analysis shows that the global financial crisis imposed a shock (mostly demand-driven) on the financing as well as on the investments of these firms. Moreover, we find that financially constrained firms use less external debt financing and invest smaller amounts. They also rely on less trade credit. With regard to bank financing, newly founded firms which are more financially constrained accumulate less bank debt and repay initial bank debt slower than their non-financially constraint counterparts. Finally, we find that financially constrained firms are affected to a smaller degree by the financial crisis than their less financially constrained counterparts.

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Author:Julia Hirsch, Uwe WalzGND
Parent Title (English):SAFE working paper series ; No. 191
Series (Serial Number):SAFE working paper series (191)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2017
Year of first Publication:2017
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2018/01/30
Tag:financial constraints; financial crisis; financing decisions; investment decisions; newly founded firms
Issue:This version: December 14, 2017
Page Number:29
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht