Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193926
Authors: 
Lawless, Martina
O'Toole, Conor
Slaymaker, Rachel
Year of Publication: 
2018
Series/Report no.: 
ESRI Working Paper 589
Abstract: 
In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment is below what would be expected given how companies are currently performing. The estimated magnitude of this investment gap is economically meaningful at just over 30 per cent in 2016. We explore the extent to which the gap is explained by financial market challenges such as access to finance, interest rates, and the availability of collateral. Financing frictions are found to account for a moderate share of the overall investment gap (between 10 per cent and 20 per cent of the gap).
Subjects: 
SMEs
financing constraints
investment
market failures
JEL: 
O34
E01
D22
O38
Document Type: 
Working Paper

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