Does employment protection legislation affect credit access? Evidence from Europe

Arbeitspapier

We investigate the impact of employment protection on firms' credit access by looking at both credit obtained from banks and firms' decision to apply for a loan. We find that greater flexibility in structuring the employees' working hours and in dismissing employees increases the probability that firms obtain credit and that greater flexibility in dismissing employees decreases the probability that firms are discouraged from applying for credit. However, our findings also reveal that firms perceive regulations providing flexibility with regard to the employees' working hours differently from banks, leading to a situation in which firms are more likely to be discouraged from applying for a loan, even though the probability to obtain a loan increases. Our results are robust to confounding, endogeneity, selection bias as well as to alternative specifications.

Object Details

• ISBN: 978-92-899-2785-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2063

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Labor Contracts
• Subject: Credit Access ; Discouraged Borrower ; Employment Protection Legislation ; Labour Market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Moro, Andrea ; Maresch, Daniela ; Ferrando, Annalisa ; Udell, Gregory F.
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2017

Further information

• DOI: doi:10.2866/651417
• Handle: http://hdl.handle.net/10419/175687
• Last update: 10.03.2025, 11:41 AM CET