Growing SMEs The sensitivity of investment and employment to the cost of debt financing. - Diana Bonfim
Sobre o evento
How sensitive is the growth of small firms to the cost of borrowing? This paper uses variation in the access to a credit certification program in Portugal to estimate the sensitivity of small and medium sized firms (SMEs)´ investment and employment to the cost of debt financing. The program was implemented during the global financial crisis to prevent small firms from becoming credit constrained. The targeted program provides a credit certification as well as a loan guarantee by the Portuguese government to firms with a minimum credit quality. The program design and implementation allows for a multidimensional regression discontinuity methodology to estimate its real effects over a decade. When comparing firms around cutoff points, we find that eligible firms increase their borrowing, and borrow at significantly lower rates than non-eligible firms. Targeted firms also increase investment and employment when compared to non-certified firms. The program was effective in ensuring small firms continued to grow during the financial crisis, while the certification effects matter mostly in the postcrisis period.