Determinants of financing constraints

Using a recursive bivariate probit model and survey data covering the period 2014-2018, the present paper aims to assess which factors in the financial market (supply side) have a higher impact on firms' likelihood to be financially constrained. The results show that after controlling for potential endogenous bias due to unobservable firm characteristics, being an innovative firm increases the probability of being financially constrained between 21 and 32%. The nature of the innovation strategy also seems to influence the severity of financing constraints. For financially constrained firms, the main factors that limit future financing for growth ambitions are the lack of collateral, bureaucracy, and too high a price. Findings also indicate that measures to facilitate equity investments and making existing public measures easier are the most important factors for future financing while tax incentives only play a minor role.

Automated summary

Using a recursive bivariate probit model and survey data from 2014-2018, this study examines the impact of financial market factors on firms' likelihood of facing financial constraints. Innovative firms are more likely to be financially constrained, with lack of collateral, bureaucracy, and high prices being the main limiting factors for future financing. Facilitating equity investments and simplifying existing public measures are crucial for future financing, while tax incentives have a minor role.