EIB Working Papers 2018/01 – What Finance for What Investment? Survey-Based Evidence for European Companies
This paper examines the link between types of financing available and decisions to conduct different type of investment by European firms, using a novel firm-level survey of the European Investment Bank (EIBIS). The paper provides new evidence and contributes to previous research in the following ways: first it considers the heterogeneous effect of internal and external finance on different tangible and intangible investment types. Second, the analysis focuses on a broad spectrum of non-financial corporations across size classes from different countries. By using a multinomial fractional response model to estimate the finance-investment link, it finds that SMEs and large enterprises show a different financing behaviour for their investment activity. The results suggest that SMEs’ tangible asset investment is positively related to the use of bank finance, whereas internal finance is preferred for intangible asset investments.
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