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01/2019
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1 Adverse selection arises when banks cannot discriminate between good and bad projects because they are unable to assess the capabilities of SME owner-managers (Binks et al, 1992). The adverse selection effect means that the borrower quality is ex ante undetecTable by the lending bank which gives the firm an unfair advantage. Sequentially, banks will not accept to grant credit under a higher interest rate because higher risk lending is not expected to be rewarded with higher return. Furthermore, if banks raise the interest rate, the borrowers will prefer riskier projects. This would act against the interest of fixed- claim debtholders as the likelihood of bankruptcy increases. This is the moral hazard effect-ex post performance/behavior (Steijvers and Voordeckers, 2009a).
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2 An innovation can be a new product or service, a new production process or technology, a new structure or administrative system, a new plan or program pertaining to organizational members (Demanpour, 1991) and can be defined as the effective application of processes and products new to the organization and designed to benefit it and its stakeholders. According to OECD/Eurostat (2005) innovation is the introduction of a new significantly improved product (good or service), process, organizational method or marketing by some firm and innovative firms are the ones that implement an innovation during the review period.
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𝑖 = 1, … , 𝑁 𝑡 = 1, … , 𝑇
𝑌
𝑖𝑡= 𝑋
𝑖𝑡𝛽 + 𝛼
𝑖𝐷
𝑖+ 𝜀
𝑖𝑡𝑌
𝑖𝑡𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝑖𝑡; 𝑆ℎ𝑜𝑟𝑡 − 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡
𝑖𝑡; 𝑀𝑒𝑑𝑖𝑢𝑚 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡
𝑖𝑡𝑋
𝑖𝑡𝛽
𝛼
𝑖𝐷
𝑖𝜀
𝑖𝑡60
𝑌
𝑖𝑡𝜀
𝑖𝑡~𝑁(0, 𝜎
𝜀2) 𝑋
𝑖𝑡𝜀
𝑖𝑡𝑌
𝑖𝑡= 𝑋
𝑖𝑡𝛽 + 𝜈
𝑖+ 𝜀
𝑖𝑡𝜈
𝑖𝜈
𝑖~𝑁(0, 𝜎
𝜈2) 𝜀
𝑖𝑡𝑋
𝑖𝑡𝜀
𝑖𝑡𝜈
𝑖61
𝑻𝒐𝒕𝒂𝒍 𝑫𝒆𝒃𝒕
it= β
0+ β
1𝐴𝑔𝑒 + β
2𝑙𝑛 (𝑆𝑖𝑧𝑒 + 1)
it+ β
3𝐺𝑟𝑜𝑤𝑡ℎ
it+
β
4𝑇𝑎𝑛𝑔𝑖𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
5𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
6𝑂𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝
𝑖𝑡+ β
7𝐼𝑛𝑛𝑜𝑣𝑎𝑡𝑖𝑜𝑛
it+ β
8𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑖𝑡+ β
9𝐶𝑟𝑖𝑠𝑖𝑠
it+ 𝑑
j𝑅𝑒𝑔𝑖𝑜𝑛
j+ 𝑣
i+ ε
it𝑺𝒉𝒐𝒓𝒕 − 𝑻𝒆𝒓𝒎 𝑫𝒆𝒃𝒕
it= β
0+ β
1𝐴𝑔𝑒 + β
2𝑙𝑛 (𝑆𝑖𝑧𝑒 + 1)
it+ β
3𝐺𝑟𝑜𝑤𝑡ℎ
it+ β
4𝑇𝑎𝑛𝑔𝑖𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
5𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
6𝑂𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝
𝑖𝑡+ β
7𝐼𝑛𝑛𝑜𝑣𝑎𝑡𝑖𝑜𝑛
it+ β
8𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑖𝑡+ β
9𝐶𝑟𝑖𝑠𝑖𝑠
it+ 𝑑
j𝑅𝑒𝑔𝑖𝑜𝑛
j+ 𝑣
i+ ε
it𝑴𝒆𝒅𝒊𝒖𝒎 𝑳𝒐𝒏𝒈 − 𝑻𝒆𝒓𝒎 𝑫𝒆𝒃𝒕
it= β
0+ β
1𝐴𝑔𝑒 + β
2𝑙𝑛 (𝑆𝑖𝑧𝑒 + 1)
it+ β
3𝐺𝑟𝑜𝑤𝑡ℎ
it+ β
4𝑇𝑎𝑛𝑔𝑖𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
5𝑃𝑟𝑜𝑓𝑖𝑡𝑎𝑏𝑖𝑙𝑖𝑡𝑦
it+ β
6𝑂𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝
𝑖𝑡+
β
7𝐼𝑛𝑛𝑜𝑣𝑎𝑡𝑖𝑜𝑛
it+ β
8𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑖𝑡+ β
9𝐶𝑟𝑖𝑠𝑖𝑠
it+ 𝑑
j𝑅𝑒𝑔𝑖𝑜𝑛
j+ 𝑣
i+ ε
it𝑅𝑒𝑔𝑖𝑜𝑛
j62
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6 Relatively to the relation between medium long-term debt and the international financial crisis (Crisis=1), on the subsample (see Table 9-Panel B) it is reported a positive relation. Because the subsample encompasses only 7 years (excluding the firs t 3 years of the study) this results cannot be correct since it is exactly the period where there is an indication on the credit maturity roll over.
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