How Do Banks Screen Innovative Firms? Evidence from Start-Up Panel Data
Type
working paper
Date Issued
2012
Author(s)
Abstract
Start-up firms often face difficulties in raising external funds. Employing a unique panel dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups are less likely to use bank finance and face more difficulties in raising bank finance than low-tech start-ups. We find that external credit scores do affect the availability of credit for start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm's industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size.
Language
English
Keywords
Innovation
Start-up
Credit information sharing
Soft information
HSG Classification
contribution to scientific community
Refereed
No
Number
No. 12-032
Subject(s)
Eprints ID
212517