Access to bank financing and start‐up resilience: A survival analysis across business sectors in a time of crisis

Abstract

AbstractThe presence of exogenous global shocks due to the 2007/2008 economic and financial crisis and the current global pandemic crisis are deeply hampering economic operators' overall ability to access credit. Small and medium‐sized enterprises and start‐ups are most severely affected by credit rationing. This paper investigates whether access to bank loans in the early stage of a start‐up's lifecycle is a predictor of a firm's default in a time of economic crisis. We ground our analysis on a firm‐level longitudinal data set of Italian new capital companies born from 2004 to 2006. Implementing a discrete‐time proportional hazard model we study their likelihood of default up to 2014 after controlling for a consistent number of other firms, industry and innovation related characteristics. The main findings confirm that access to bank loans significantly enhances the resilience of Italian start‐ups. By taking into consideration the sectoral degree of innovation where firms operate, we also find that bank financing still exerts a positive influence on firm survival in both less and more innovative industries. However, there is evidence of a stronger positive influence on of long‐term debt on the survival of firms operating in low‐ and medium‐low innovative industries.