Estimating an SME investment gap and the contribution of financing frictions

Arbeitspapier

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).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ESRI Working Paper ; No. 589

Classification and Topics

• Classification: Wirtschaft ; Intellectual Property and Intellectual Capital ; Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts ; Firm Behavior: Empirical Analysis ; Technological Change: Government Policy
• Subject: SMEs ; financing constraints ; investment ; market failures

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lawless, Martina ; O'Toole, Conor ; Slaymaker, Rachel
• Event: Veröffentlichung
• (who): The Economic and Social Research Institute (ESRI)
• (where): Dublin
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/193926
• Last update: 10.03.2025, 11:44 AM CET