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Estimating an SME investment gap and the contribution of financing frictions. ESRI WP589, March 2018

Lawless, Martina and O'Toole, Conor and Slaymaker, Rachel (2018) Estimating an SME investment gap and the contribution of financing frictions. ESRI WP589, March 2018. [Working Paper]

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    Abstract

    In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment is below what would be expected given how companies are currently performing. The estimated magnitude of this investment gap is economically meaningful at just over 30 per cent in 2016. We explore the extent to which the gap is explained by financial market challenges such as access to finance, interest rates, and the availability of collateral. Financing frictions are found to account for a moderate share of the overall investment gap (between 10 per cent and 20 per cent of the gap).

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > industrial policy
    Countries > Ireland
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Economic and Social Research Institute (ESRI), Dublin > ESRI Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 29 Dec 2019 14:30
    Number of Pages: 27
    Last Modified: 29 Dec 2019 14:30
    URI: http://aei.pitt.edu/id/eprint/102202

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