[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20172063.html
   My bibliography  Save this paper

Does employment protection legislation affect credit access? Evidence from Europe

Author

Listed:
  • Moro, Andrea
  • Maresch, Daniela
  • Ferrando, Annalisa
  • Udell, Gregory F.
Abstract
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. JEL Classification: D22, G21, G32, J41

Suggested Citation

  • Moro, Andrea & Maresch, Daniela & Ferrando, Annalisa & Udell, Gregory F., 2017. "Does employment protection legislation affect credit access? Evidence from Europe," Working Paper Series 2063, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20172063
    Note: 235236
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2063.en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Olga Kuzmina, 2013. "Operating Flexibility and Capital Structure: Evidence from a Natural Experiment," Working Papers w0197, Center for Economic and Financial Research (CEFIR).
    2. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    3. Agrawal, Ashwini K. & Matsa, David A., 2013. "Labor unemployment risk and corporate financing decisions," Journal of Financial Economics, Elsevier, vol. 108(2), pages 449-470.
    4. Elsas, Ralf, 2005. "Empirical determinants of relationship lending," Journal of Financial Intermediation, Elsevier, vol. 14(1), pages 32-57, January.
    5. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2010. "The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries [Technology and labour regulations]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(61), pages 117-163.
    6. Cho, Seong-Soon & El Ghoul, Sadok & Guedhami, Omrane & Suh, Jungwon, 2014. "Creditor rights and capital structure: Evidence from international data," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 40-60.
    7. Martinelli, Cesar, 1997. "Small firms, borrowing constraints, and reputation," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 91-105, May.
    8. Claudio A. Piga & Marco Vivarelli, 2004. "Internal and External R&D: A Sample Selection Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(4), pages 457-482, September.
    9. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    10. Julián Messina & Giovanna Vallanti, 2007. "Job Flow Dynamics and Firing Restrictions: Evidence from Europe," Economic Journal, Royal Economic Society, vol. 117(521), pages 279-301, June.
    11. Jose M. Liberti & Atif R. Mian, 2009. "Estimating the Effect of Hierarchies on Information Use," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 4057-4090, October.
    12. Ioana Marinescu, 2009. "Job Security Legislation and Job Duration: Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 465-486, July.
    13. Schmalz, Martin, 2018. "Unionization, Cash, and Leverage," CEPR Discussion Papers 12595, C.E.P.R. Discussion Papers.
    14. Jun Qian & Philip E. Strahan, 2007. "How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans," Journal of Finance, American Finance Association, vol. 62(6), pages 2803-2834, December.
    15. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    16. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    17. Kim, Hyunseob, 2020. "How does labor market size affect firm capital structure? Evidence from large plant openings," Journal of Financial Economics, Elsevier, vol. 138(1), pages 277-294.
    18. Kee‐Hong Bae & Vidhan K. Goyal, 2009. "Creditor Rights, Enforcement, and Bank Loans," Journal of Finance, American Finance Association, vol. 64(2), pages 823-860, April.
    19. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
    20. Lusa, Amaia & Pastor, Rafael & Corominas, Albert, 2008. "Determining the most appropriate set of weekly working hours for planning annualised working time," International Journal of Production Economics, Elsevier, vol. 111(2), pages 697-706, February.
    21. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
    22. repec:bla:econom:v:45:y:1978:i:180:p:329-45 is not listed on IDEAS
    23. Sudheer Chava & Dmitry Livdan & Amiyatosh Purnanandam, 2009. "Do Shareholder Rights Affect the Cost of Bank Loans?," The Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 2973-3004, August.
    24. Ferrando, Annalisa & Moro, Andrea & Maresch, Daniela, 2015. "Creditor protection, judicial enforcement and credit access," Working Paper Series 1829, European Central Bank.
    25. Elena Simintzi & Vikrant Vig & Paolo Volpin, 2015. "Labor Protection and Leverage," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 561-591.
    26. Doris Neuberger & Maurice Pedergnana & Solvig Räthke-Döppner, 2008. "Concentration of Banking Relationships in Switzerland: The Result of Firm Structure or Banking Market Structure?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 33(2), pages 101-126, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stieglitz, Moritz & Setzer, Ralph, 2022. "Firm-level employment, labour market reforms, and bank distress," Journal of International Money and Finance, Elsevier, vol. 120(C).
    2. Kärnä Anders, 2021. "Take it to the (public) bank: The efficiency of public bank loans to private firms," German Economic Review, De Gruyter, vol. 22(1), pages 27-62, February.
    3. Li, Tongxia & Ang, Tze Chuan ‘Chewie’ & Lu, Chun, 2023. "Employment protection and the provision of trade credit," Journal of Banking & Finance, Elsevier, vol. 155(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Moro, Andrea & Maresch, Daniela & Ferrando, Annalisa & Udell, Gregory F., 2022. "Funding innovation and the regulatory environment – The role of employment protection legislation," Journal of Business Research, Elsevier, vol. 145(C), pages 745-756.
    2. Ferrando, Annalisa & Moro, Andrea & Maresch, Daniela, 2015. "Creditor protection, judicial enforcement and credit access," Working Paper Series 1829, European Central Bank.
    3. Liu, Yixin & Liu, Yu & Wei, Zuobao, 2022. "Property rights protection, financial constraint, and capital structure choices: Evidence from a Chinese natural experiment," Journal of Corporate Finance, Elsevier, vol. 73(C).
    4. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Other publications TiSEM 40d5005c-1626-4511-aa8a-f, Tilburg University, School of Economics and Management.
    5. Godlewski, Christophe J. & Le, Nhung Hong, 2022. "Family firms and the cost of borrowing: empirical evidence from East Asia," Research in International Business and Finance, Elsevier, vol. 60(C).
    6. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Other publications TiSEM 300df022-4701-4773-a8b7-c, Tilburg University, School of Economics and Management.
    7. Kirschenmann, K., 2010. "The Dynamics in Requested and Granted Loan Terms when Bank and Borrower Interact Repeatedly," Discussion Paper 2010-63, Tilburg University, Center for Economic Research.
    8. Moro, Andrea & Wisniewski, Tomasz Piotr & Mantovani, Guido Massimiliano, 2017. "Does a manager's gender matter when accessing credit? Evidence from European data," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 119-134.
    9. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    10. Gabriel J. Power & Djerry C. Mbianda Tandja, 2022. "Should lenders also advise? Evidence from project loans," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(4), pages 961-985, December.
    11. Paulo P. Alves & M. Ricardo Cunha & Luís K. Pacheco & João M. Pinto, 2022. "How Banks Price Loans for LBOs: an Empirical Analysis of Spread Determinants ," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(3), pages 163-200, December.
    12. Bill Francis & Iftekhar Hasan & Liang Song, 2012. "Are Firm- And Country-Specific Governance Substitutes? Evidence From Financial Contracts In Emerging Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 35(3), pages 343-374, September.
    13. Alessandro Gambini & Alberto Zazzaro, 2013. "Long-lasting bank relationships and growth of firms," Small Business Economics, Springer, vol. 40(4), pages 977-1007, May.
    14. Roman, Raluca A., 2020. "Winners and losers from supervisory enforcement actions against banks," Journal of Corporate Finance, Elsevier, vol. 60(C).
    15. Allen N. Berger & Tanakorn Makaew & Raluca Roman, 2015. "Did bank borrowers benefit from the TARP program : the effects of TARP on loan contract terms," Research Working Paper RWP 15-11, Federal Reserve Bank of Kansas City.
    16. Moro, Andrea & Belghitar, Yacine & Mateus, Cesario, 2021. "National culture and small firms' use of trade credit: Evidence from Europe," Global Finance Journal, Elsevier, vol. 49(C).
    17. Lenzu, Simone & Manaresi, Francesco, 2018. "Do Marginal Products Differ from User Costs? Micro-Level Evidence from Italian Firms," Working Papers 276, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    18. Moro, Andrea & Maresch, Daniela & Fink, Matthias & Ferrando, Annalisa & Piga, Claudio, 2020. "Spillover effects of government initiatives fostering entrepreneurship on the access to bank credit for entrepreneurial firms in Europe," Journal of Corporate Finance, Elsevier, vol. 62(C).
    19. Álvarez-Botas, Celia & González, Víctor M., 2023. "The value of relationship banking: International evidence," Research in International Business and Finance, Elsevier, vol. 64(C).
    20. repec:zbw:bofrdp:2012_012 is not listed on IDEAS
    21. David A. Matsa, 2018. "Capital Structure and a Firm’s Workforce," NBER Working Papers 25125, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    credit access; discouraged borrower; employment protection legislation; labour market;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20172063. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.