Availability of External Capital and Employment Growth

Availability of External Capital and Employment Growth

Period: 01.09.2005 – 31.12.2008

The availability of external capital is of central importance for German small and medium-sized enterprises. In the bank-based financial system of Germany bank loans have an important role for the financial strength and the expansion of companies and therefore also for the protection and creation of jobs. In this project we study whether failed loan negotiations have (negative) consequences for employment. If this is the case, we will quantify them. The empirical work is based on the KfW-Mittelstandspanel (KfW-panel of small and medium-sized enterprises).

When analysing the relationship between loan negotiations and employment growth, it is necessary to consider many factors. In order to structure the empirical analysis, we divide the research question into several steps and start from the following hypothetical sequence of events: planned investment, need for external capital, result of loan negotiation, realised investment, employment growth.

A loan negotiation may fail, if the bank makes no offer. However, a company can also decline a loan offer by the bank, if the conditions are not attractive. In both cases the effects on employment growth can be quite different. Furthermore, the data set allows a detailed analysis of different reasons - on the side of the company as well as on the side of the bank - that can be decisive for the collapse of negotiations. Depending on the reason for failure, employment growth may be affected differently.

Furthermore, we analyse the influence of failed loan negotiations on the investment volume. The data has information on whether investments have been realised as planned, scaled down, delayed or cancelled. These reactions can have different effects on employment growth.

Project members

Prof. Dr. Elisabeth Müller

Prof. Dr. Elisabeth Müller

Project Coordinator
Research Associate

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Dr. Georg Licht

Dr. Georg Licht

Research Associate

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Cooperation partner
KfW Group, Frankfurt am Main, DE

Selected Events

Research Seminars

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Rich data sets with a whopping number of covariates require new approaches to variable selection, estimation and inference. We present a partial survey on modern econometric shrinkage methods which are…
Research Seminars

R&D Investment, Exporting, and Productivity Dynamics

A positive correlation between productivity and export market participation has been well documented in producer micro data. Recent empirical studies and theoretical analyses have emphasized that this may…

Contact

Research Associate
Prof. Dr. Elisabeth Müller
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