A Panel Data Analysis of Firms’ Access to Credit in the Euro Area : Endogenous Selection, Individual Heterogeneity and Time Persistence

Using panel firm-level data, this paper analyses the main factors affecting firms' access to bank credit in eleven Euro Area countries over the period 2014-2016. We focus on firm's loan demand behaviour and on bank's actual credit granting decision, using alternative measures of credit constraints and controlling for endogenous sample selection and individual heterogeneity. Furthermore, we explicitly analyse the dynamics of firms' access to credit and account for time persistence in loan demand and credit constraints. Empirical results show that small and informationally opaque businesses, with deteriorated public support and credit history, experience greater difficulties in accessing to bank loans. Moreover, we provide evidence of significant persistence in access to credit over time. In particular, we find that firms having already experienced credit restrictions are more likely to face further new financing constraints, while enterprises that repeatedly recur to external financing seem to have improved access to credit