1. Home
  2. Studien
  3. Business financing in Europe: How do higher interest rates impact companies’ financial situation?
Daniel Bendel / Markus Demary / Michael Voigtländer IW-Report Nr. 28 18. September 2017 Business financing in Europe: How do higher interest rates impact companies’ financial situation?

Companies’ access to finance has an important impact on their profitability and growth prospects. Without external financing, most firms are not able to invest, which is a prerequisite for economic growth. Unlike in the US, which has a capital market-based financial system, banks are the dominant lenders for firms in the Eurozone.

PDF herunterladen
How do higher interest rates impact companies’ financial situation?
Daniel Bendel / Markus Demary / Michael Voigtländer IW-Report Nr. 28 18. September 2017

Business financing in Europe: How do higher interest rates impact companies’ financial situation?

IW-Report

PDF herunterladen

Teilen Sie diesen Artikel:

oder kopieren Sie den folgenden Link:

Der Link wurde zu Ihrer Zwischenablage hinzugefügt!

Companies’ access to finance has an important impact on their profitability and growth prospects. Without external financing, most firms are not able to invest, which is a prerequisite for economic growth. Unlike in the US, which has a capital market-based financial system, banks are the dominant lenders for firms in the Eurozone.

Banking crises endanger the access to finance. In the wake of the banking and sovereign debt crisis in the Eurozone risk premia for sovereign debt went up and spilled over to banking markets. Besides sovereigns, also firms faced credit constraints, especially in countries with presumably less sustainable public debt. After the ECB accelerated its accommodative monetary policy stance even further, interest rates for sovereigns and firms went down considerably, enabling firms to lend money at historically low charges. With the strengthened recovery of the Eurozone, the end of this ultra-low interest rate environment seems to be near, posing new challenges for firms in the Eurozone.

The aim of this study is to analyze, how firms have dealt with this changing financing environment in the recent years and to which degree companies are prepared for a change towards higher interest rates. For answering this research question we use data from the survey on the access to finance of enterprises (SAFE), provided by the ECB.

We identify companies that are vulnerable to increasing interest rates, as they will presumably encounter economic problems when financing costs will rise. The share of vulnerable companies is extremely high in Greece (9.4 percent), Italy (8.5 percent) and France (5.7 percent). The lowest rate can be found in Germany (0.7 percent). With respect to the size of the national business sectors, 39 percent of all vulnerable firms a located in Italy, 23 percent in France and 15 percent in Spain. Thus, these countries could be hit hard when the ECB starts to tighten monetary policy. As comparatively many large companies are prone to the risk of increasing interest rates in Portugal (4.0 percent of the large Portuguese companies) and Greece (10.0 percent of the large Greek companies), the labor markets of these countries could be affected disproportionally when interest rates increase to fast or too high.

PDF herunterladen
How do higher interest rates impact companies’ financial situation?
Daniel Bendel / Markus Demary / Michael Voigtländer IW-Report Nr. 28 18. September 2017

Daniel Bendel / Markus Demary / Michael Voigtländer: Business financing in Europe – How do higher interest rates impact companies’ financial situation?

IW-Report

PDF herunterladen

Teilen Sie diesen Artikel:

oder kopieren Sie den folgenden Link:

Der Link wurde zu Ihrer Zwischenablage hinzugefügt!

Mehr zum Thema

Artikel lesen
Rising inflation – is it here to stay?
Sandra Parthie Veranstaltung 24. Januar 2022

Livestream debate: Rising inflation – is it here to stay?

The recent surge in inflation has sparked a sometimes polarizing debate among central bankers, analysts, policymakers and the wider public. In July 2021, the ECB changed its inflation objective to a symmetric 2% target over the medium term. But euro area ...

IW

Artikel lesen
Berthold Busch / Björn Kauder IW-Report Nr. 3 19. Januar 2022

Braucht die EU neue Eigenmittel?

Die Europäische Union wird sich für die Finanzierung des Next-Generation-EU-Programms im großen Umfang verschulden. Die Tilgung dieser Schulden soll bis in das Jahr 2058 andauern. Im Zusammenhang mit dem Eigenmittelbeschluss für die Jahre 2021 bis 2027 wurde ...

IW

Mehr zum Thema

Inhaltselement mit der ID 8880