Borrower discouragement prevalence for Eurozone SMEs: Investigating the impact of economic sentiment

We investigate whether economic sentiment exerts an impact on firms’ decision to apply for a bank loan or not and hence its impact on discouragement prevalence. Using survey data for Eurozone firms and employing a Probit Heckman selection model, we document that a positive shock in economic sentimen...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2022-02, Vol.194, p.161-171
Main Authors: Anastasiou, Dimitris, Kallandranis, Christos, Drakos, Konstantinos
Format: Article
Language:English
Subjects:
Discouraged bank borrowers
European SMEs
Heckman Selection
Sentiment shock
Sentiment shock volatility
Uncertainty
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Summary:We investigate whether economic sentiment exerts an impact on firms’ decision to apply for a bank loan or not and hence its impact on discouragement prevalence. Using survey data for Eurozone firms and employing a Probit Heckman selection model, we document that a positive shock in economic sentiment lowers the percentage of discouraged bank borrowers in the economy. In contrast, higher economic sentiment shock volatility leads to an increase in discouragement.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2021.12.022