Green management, access to credit, and firms' vulnerability to the COVID-19 crisis

This paper investigates the consequences of the COVID-19 crisis on firms' performance and financial vulnerability. Exploiting longitudinal firm-level data from the World Bank's "Enterprise Surveys follow-up on COVID-19" for 20 European countries, we assess whether green management quality and pre-pandemic credit access difficulties affect firms' ability to withstand the negative impact of the pandemic. Our results indicate that green firms are more resilient to the pandemic shock. In particular, the likelihood of pandemic-induced drops in sales and liquidity significantly decreases as the quality of green management improves. Conversely, prior financing constraints strongly exacerbate the pandemic's impact on firms' performance and amplify liquidity stress and financing problems. Credit-constrained enterprises are not only more likely to experience liquidity shortages and repayment problems, but they also face higher difficulties in accessing bank financing. The COVID-19 crisis has also hampered the beneficial role that green management exerted on access to credit in the pre-pandemic period. During the pandemic, firms with sound environmental management practices do not benefit from improved access to finance and have a lower demand for credit, possibly suggesting a slowdown in their green investment activities.

Supplementary information

The online version contains supplementary material available at 10.1007/s11187-023-00759-1.

Heterogeneity and state dependence in firms' access to bank credit

This paper investigates firms' access to bank credit in eleven euro area countries over the periods 2014-2019. Exploiting firm-level longitudinal data, we analyse loan demand and credit rationing probabilities, accounting for sample selection, unobserved heterogeneity and state dependence. Empirical results show that small and informationally opaque businesses, with deteriorated public support and credit history, face greater difficulties in obtaining bank loans. Furthermore, we provide evidence of a significant degree of state dependence in access to credit. In particular, firms that have already experienced credit restrictions are more likely to face further constraints, while enterprises that applied for bank financing in the past seem to have easier access to credit. Focusing on the subset of firms actually needing additional bank financing, we also find that past credit restrictions significantly reduce their current demand, providing evidence of a significant discouragement effect.

Supplementary Information

The online version contains supplementary material available at 10.1007/s11187-021-00545-x.

A bivariate finite mixture growth model with selection

A model is proposed to analyze longitudinal data where two response variables are available, one of which is a binary indicator of selection and the other is continuous and observed only if the first is equal to 1. The model also accounts for individual covariates and may be considered as a bivariate finite mixture growth model as it is based on three submodels: (i) a probit model for the selection variable; (ii) a linear model for the continuous variable; and (iii) a multinomial logit model for the class membership. To suitably address endogeneity, the first two components rely on correlated errors as in a standard selection model. The proposed approach is applied to the analysis of the dynamics of household portfolio choices based on an unbalanced panel dataset of Italian households over the 1998–2014 period. For this dataset, we identify three latent classes of households with specific investment behaviors and we assess the effect of individual characteristics on households’ portfolio choices. Our empirical findings also confirm the need to jointly model risky asset market participation and the conditional portfolio share to properly analyze investment behaviors over the life-cycle.