The Real Effects of Improving Access to Capital Markets Financing: Evidence from European SMEs

40 Pages Posted: 21 Aug 2017

See all articles by Alexander Eisele

Alexander Eisele

UBS

Eric Nowak

Swiss Finance Institute; Universita della Svizzera italiana (USI Lugano)

Date Written: August 2017

Abstract

Due to crisis-ridden banks and new regulation (Basel III, IFRS, Mifid), there was a significant growth in innovative financing sources for SMEs in recent years. This paper uses the introduction of SME equity and bond segments as quasi-exogenous shocks and studies their effect on firm behavior. First, we find that the introduction of dedicated equity segments for SMEs increases their equity financing significantly (around 6% in relative terms). Equivalently, the introduction of SME bond segments increases bond financing of SMEs significantly (around 9.5% in relative terms). Our results suggest a positive complementarity of introducing SME bond and equity segments, as higher disclosure costs can be leveraged across segments. Second, we document significant real effects. In line with theory, an easier access to external finance increases investment and decreases the amount of cash holdings.

Keywords: equity capital markets, finance innovations, SME financing

Suggested Citation

Eisele, Alexander and Nowak, Eric, The Real Effects of Improving Access to Capital Markets Financing: Evidence from European SMEs (August 2017). CEPR Discussion Paper No. DP12227, Available at SSRN: https://ssrn.com/abstract=3023212

Alexander Eisele (Contact Author)

UBS ( email )

3601 Rigby Rd
Miamisburg, OH 45342
United States

Eric Nowak

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Universita della Svizzera italiana (USI Lugano) ( email )

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