Influence of the Economic Conjuncture on SME Investment: Empirical Evidence Using Dynamic Panel Estimators pp. 143-158
Authors: (Silvia Mendes, Paulo Macas Nunes, Zelia Serrasqueiro, Escola Superior de Tecnologia e Gestão de Oliveira do Hospital, Instituto Politécnico de Coimbra, Portugal, and others)
Abstract: Based on a sample of 1845 Portuguese SMEs for the period 1999-2006, and using the two-step estimation method in order to solve the problem of sample bias as a consequence of the matter of survival, we investigate if the economic conjuncture has significant effects on the investment of Portuguese SMEs. The empirical evidence obtained by using dynamic panel estimators, corresponding to the second step of the estimation method, lets us conclude that the economic conjuncture has a significant impact on investment by Portuguese SMEs: 1) higher reference interest rates for loans have a restricting effect on investment; and 2) economic growth, in terms of Gross National Product, contributes to increased investment. In addition, the empirical evidence obtained from probit regressions, corresponding to the first step of the estimation method, also allows us to conclude that: 1) higher reference interest rates for loans contribute to
diminished probability of the survival of Portuguese SMEs; and 2) economic growth contributes to increased probability of the survival of Portuguese SMEs. In general we find the economic conjuncture has a significant impact on investment by Portuguese SMEs. Concerning companies’ intrinsic determinants: 1) Investment in the Previous
Period; 2) Cash Flow; 3) Sales; 4) Debt; 5) Age; and 6) Growth Opportunities, the empirical evidence obtained allows us to conclude that: 1) investment in the previous period and cash flow are positive determinants of investment in Portuguese SMEs; 2) debt is a restrictive determinant of investment in Portuguese SMEs; and 3) sales, age and growth opportunities are neither positive nor restrictive factors of investment by Portuguese SMEs.