Small and vulnerable during crises? Firm size and financing constraint dynamics

Helle , Da id; Ka apanagio is, Pan elis; Nilsen, Øi ind A.
A icle — Published Ve sion
Small and ulne able du ing c ises? Fi m size and
inancing cons ain dynamics
Small Business Economics
P o ided in Coope a ion wi h:
Sp inge Na u e
Sugges ed Ci a ion: Helle , Da id; Ka apanagio is, Pan elis; Nilsen, Øi ind A. (2025) : Small and
ulne able du ing c ises? Fi m size and inancing cons ain dynamics, Small Business Economics,
ISSN 1573-0913, Sp inge US, New Yo k, NY, Vol. 65, Iss. 1, pp. 451-473,
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RESEARCH ARTICLE
Small and ulne able du ing c ises? Fi m size and inancing
cons ain dynamics
Da id Helle ·Pan elis Ka apanagio is ·
Øi ind A. Nilsen
Accep ed: 24 Decembe 2024
© The Au ho (s) 2025
Abs ac Thiss udyanalyzes hedynamicso inanc-
ing cons ain s unde changing economic condi ions
and he ole o i m size in his con ex . Using admin-
is a i e da a om Ge many, we quan i y inancing
cons ain s exp essed as he p obabili y ha a i m
encoun e s excess demand o excess supply. On a e -
age, small- and medium-sized en e p ises (SMEs) a e
indeed mo e likely han la ge i ms o ace excess
demand o loans. Using he G ea Financial C isis as
an empi ical se ing, we show ha igh ening inancing
condi ions do no a ec smalle i ms disp opo ion-
ally, bu gene ally isky bo owe s. Impo an ly, pos -
c isis ends in deb - a ios, p o i abili y, in es men s,
Supplemen a y In o ma ion The online e sion con ains
supplemen a y ma e ial a ailable a h ps://doi.o g/10.1007/
s11187-024-00996-y.
D. Helle
Poli ecnicodiMilano,Schoolo Managemen ,ViaLamb uschini
4b, 20156 Milan, I aly
D. Helle (B)
Max Planck Ins i u e o Compe i ion and Inno a ion,
Ma s allpla z 1, 80539 Munich, Ge many
e-mail: da[email p o ec ed]
P. Ka apanagio is
Uni e si y o G oningen, PO Box 72, 9700, AB
G oningen, The Ne he lands
e-mail: [email p o ec ed]
Ø. A. Nilsen
No wegian School o Economics (NHH), Helle eien 30, 5045
Be gen, No way
e-mail: oi[email p o ec ed]
and employmen a e simila i espec i e o i m size,
while smalle i ms espond o he economic slowdown
by pe sis en ly building up cash bu e s. Ou esul s
u ge policymake s o conside speci ic cha ac e is ics
o bank-dependen i ms oassess hei exposu e o eco-
nomic c ises—ins ead o ocusing on size as ulne a-
bili y c i e ia pe se.
Plain English Summa y Du ing he G ea Financial
C isis in 2009, smalle i ms ended o build up hei
cash ese es as e han hei la ge coun e pa s. Pos -
c isis, bo h SMEs and la ge i ms showed simila ends
in deb , p o i abili y, and employmen . Thus, he p inci-
palimplica iono hiss udy is ha policymake sshould
ocus on speci ic isk- ela ed cha ac e is ics o i ms
o assess hei ulne abili y du ing c ises, ins ead o
implemen ing blanke policies based on i m size.
Keywo ds Financial cons ain s ·SME inancing ·
Fi m-le el da a ·Bank inancing ·
Small business esilience
JEL Classi ica ion D22 ·D53 ·G01
1 In oduc ion
Using ex e nal inancing o le e age business ope a-
ions acili a es i m-le el g ow h and os e s eal eco-
nomicac i i y(Beck e al.,2006;Ca pen e &Pe e sen,
2002; Holms öm & Ti ole, 1997; Rajan & Zingales,
1998). Financing cons ain s limi i ms’ lexibili y o
123
Small Bus Econ (2025) 65:451–473
/ Published online: 24 Janua y 2025
D. Helle e al.
ope a e, especially du ing u bulen ma ke condi ions.
Small- and medium-sized en e p ises (SMEs) a e ypi-
callyconside ed obepa icula lyexposed o economic
down u ns (D’Ama o, 2020; Egge s, 2020; Ve moesen
e al., 2013) due o hei inhe en in o ma ional opaque-
ness and associa ed agency p oblems (e.g., Aud e sch
2002; Be ge and Udell 2006; Faulkende and Pe e sen
2006). Consis en ly, p ese ing he inancing condi-
ions o SMEs du ing imes o economic dis ess is
a common objec i e pu sued by policymake s.1
The G ea Financial C isis o 2009 a guably ma ks
he mos se e e inancial c isis in ecen his o y, u g-
ing policymake s and egula o s o so en i s e ec s on
he mos ulne able i ms. The o me ECB p esiden
Ma io D aghi decla ed ha he would do “wha e e i
akes” o sa e he Eu opean economy and, in pa icu-
la , i s SMEs. Mo e speci ically, la ge-scale p og ams
we e ini ia ed o suppo small i ms, such as he ECB’s
Ou igh Mone a y T ansac ion (OMT) p og am.
While hese p og ams ce ainly ueled he supply o
loans (Fe ando e al., 2019; Udell, 2020), hey also
led o ine icien loan alloca ion as he policy ins u-
men s did no dis inguish i ms ha we e in need o
help om hose ha we e no (Acha ya e al., 2019).
Indeed, se e al s udies sugges ha inancing condi-
ions o SMEs do no disp opo ionally de e io a e in
economicc isescompa edwi hla ge i ms(A anaso a
& Wilson, 2004; De la To e e al., 2008; Kahle &
S ulz, 2013;K emp&Se es e,2013; P esbi e o e
al., 2014).2Despi e he usual liabili ies o smallness,
empi ical e idence cas s doub on he iew o classi y
SMEs as ulne able by de aul : la ge and small i ms
adjus hei inancing pa e ns du ing ecessions by
inc easing ade c edi s (Ca bo-Val e de e al., 2016),
accumula ing cash holdings (Kahle & S ulz, 2013), o
educing in es men s (Almeida e al., 2009).
In his pape , we p o ide new e idence on he deba e
abou he dynamics o inancing condi ions o small
i ms. To his end, we assess how inancing cons ain s
e ol e o e he business cycle, compa ing SMEs and
la ge i ms. Mo eo e , we ack hese i ms’ capi al
1Figu e 6 (Appendix 2) g aphically illus a es he inc eased
ocus o policymake s on SMEs’ access o c edi h oughou he
Financial C isis in 2008.
2Agg ega es s a is ics on he G ea Financial C isis in Ge many
back hese indings, indica ing ha i ms’ pe cei ed es ic i e-
ness o ob ain bank c edi s a he ou b eak o he c isis was
s onge o la ge han o medium-sized o small i ms (I o Ins i-
u e, 2019).
s uc u e and o he inancing a iables h oughou he
Global Financial C isis. In doing so, his pape sheds
ligh on a se o ques ions: Do economic slowdowns
a ec SMEs mo e s ongly han la ge i ms? How do
cons ained i ms adjus hei inancing and o he eal
economic ac i i ies o e he cycle? How did he c i-
sis a ec he ac i i ies and eco e y o bo h SMEs and
la ge i ms?
Financing cons ain s a e no di ec ly obse able
such ha empi ical in es iga ions ely on indi ec p ox-
ies (Fa e-Mensa & Ljungq is , 2016). Mos i m-
le el app oxima ions apply o only ce ain i ms, o
ins ance, hose ha ac ually pay di idends o ha e bond
a ings (see, e.g., Kaplan and Zingales 1997; Faulk-
ende and Pe e sen 2006; Whi ed and Wu 2006). O h-
e s, like (Hadlock & Pie ce, 2010), a e applicable mo e
b oadly using i m cha ac e is ics such as size and age.
These i m-le el measu es ypically ha e in common
ha hey de ine being small as a cons ain a p io i. This
a ibu e c ea es a challenge o ou empi ical analysis,
ega dless o whe he i is indeed ue ha smalle i ms
a e pa icula ly suscep ible o inancing cons ain s.
To sol e his challenge, we use a disequilib ium
model based on obse able i m cha ac e is ics, which
enables us o es ima e demand and supply o bank
loans (simila o, e.g., A anaso a and Wilson 2004;
K emp and Se es e 2013; Ca bo-Val e de e al. 2016).
We deploy he es ima es o demand and supply o de e -
mine he p obabili y o excess demand as a p oxy o
i ms’ deg ee o be inancially cons ained. Thus, we
assess he deg ee o being inancially cons ained in a
con inuous space such ha ou esul s a e no depen-
den on an equi ocal h eshold ha de ines whe he a
i m is cons ained (o no ).
We apply his me hodology using adminis a i e
da a om Ge many, he la ges economy in Eu ope.
The Ge man economy p o ides an ideal se up o
he esea ch ques ions a hand because i is adi-
ionally bank-based wi h close bank-indus y ela ion-
ships (Beck & Le ine, 2002; Schmid & K ahnen,
2004) while ha ing a dis inc i ely s ong SME sec o
(Aud e sch & Els on, 2002; De Massis e al., 2018).
Combined, he s ong dependence on bank inancing
and i s di ec use o in es men sugges s ha changes
in unde lying inancing condi ions should ha e mea-
su able e ec s on Ge man SMEs in e ms o bo ow-
ing ac i i ies. Fu he mo e, due o i s cen al ole in he
Eu opean economy, implica ions o ad e se shocks o
i m-le el ac i i ies in Ge many indi ec ly a ec i ms
123
452
Small and ulne able du ing c ises? Fi m size and inancing...
in o he membe s a es, oo. Hence, adjus men s in
i ms’bo owingac i i iesandbanklendingpo en ially
ansmi ac ossna ionalbo de s.Ou sampleconsis so
high-quali y, i m-le el da a om he Ge man Bundes-
bank, including i m balance shee s, p o i and loss, and
o he desc ip i e in o ma ion. The inal da ase com-
p ises abou 20,000 i ms o he yea s 2006 o 2015,
ou o which abou 75% a e SMEs.
Ou analysis discloses se e al indings on hedynam-
ics o inancing cons ain s o SMEs and la ge i ms.
Fi s , we con i m ha SMEs, ela i e o la ge i ms, a e
on a e age indeed mo e dependen on bank deb , ca y
highe isk, and ha e a lowe a ailabili y o colla e al.
Second, we ind ha he p obabili y o being inancially
cons ained is highe o SMEs han o la ge i ms.
Howe e , du ing he economic slowdown, his p ob-
abili y inc eased be ween 2008 and 2009 somewha
s onge o la ge i ms(7.7%) ela i e oSMEs(3.6%).
Thi d, as an immedia e esponse o he ecession, all
i ms, i espec i e o size, cu bo owing and in es -
men . Bo h SMEs and la ge i ms u he esponded by
building up cash bu e s, which con i ms ecen e i-
dence on i ms’ mi iga ion s a egies o nega i e bank-
loansupplyshocks(see,e.g.,Meinen and Soa es2022).
Fou h, condi ional on being inancially cons ained,
he e a e e y simila eco e y pa e ns o SMEs and
la ge i ms, in e ms o he use o deb , capi al expendi-
u es, and employmen . Again, inancially cons ained
SMEs esponded o he de e io a ing economic condi-
ions by building up pe sis en cash bu e s. This may
sugges ha SMEs subs i u e cash o ex e nal deb
inancing,whichisconsis en wi h heo e icalconside -
a ions, i.e., he pecking-o de heo y (Jensen & Meck-
ling, 1976), and ecen e idence ha epo s a secula
decline in bank lending, in pa icula o SMEs (e.g.,
Dell’A iccia e al. 2021; Fala o e al. 2022).
The indings o his pape enhance ou unde s and-
ing o he dynamics o inancial cons ain s. We ex end
p io esea ch on SME inancing ac i i ies in he Ge -
man con ex ha uses de elopmen s in he 1980s and
1990s as he empi ical se ing (Aud e sch & Els on,
2002; Cza ni zki & Ho en o , 2011). Ou ocus is on
a mo e ecen economic se ing, including he likely
mos impac ul economic c isis since he G ea Dep es-
sion. Fu he , we con ibu e o a cen al s eam o he
li e a u e on small business economics by in es iga -
ing small o ganiza ions in changing economic en i-
onmen s. Ou indings highligh he dynamic o gani-
za ional capabili ies o small businesses discussed in
he li e a u e (Nicolas, 2022; Raymond & S -Pie e,
2013; Wai e al., 2022). As we show, SMEs’ ope a-
ional lexibili y helps hem o na iga e h ough eco-
nomic u bulence. The eby, ou analysis con ibu es o
ela ed en ep eneu ship li e a u e ha examines small
i ms’ adap i e capaci ies in changing business en i-
onmen s, such as he digi al ans o ma ion (B uque
& Moyano, 2007; Escoz Ba agan & Becke , 2024;Hu
e al., 2023; Ku nia e al., 2015). Unlike hese s udies,
ou wo k demons a es SMEs’ lexibili y using di es -
men s and cash accumula ions o so en he ad e se
e ec s o ecessions.
Mo eo e , ou empi ical analysis inco po a es se -
e aldis inc new ea u es.P e iousanalyses ha deploy
disequilib ium models in he con ex o SME inanc-
ing (e.g., K emp and Se es e 2013; Ca bo-Val e de e
al. 2016) ypically de ine h esholds ha classi y i ms
as cons ained o uncons ained. Ins ead, we exam-
ine changes in he p obabili y dis ibu ion o excess
demand o supply ac oss ime, i.e., independen o spe-
ci ic cu o s. Impo an ly, we include i ms o all sizes
in ou es ima ions and, he e o e, do no es ic ou -
sel es o he pe spec i e o small i ms bu e alua e he
ela i e impac . This addi ion allows us o in eg a e he
li e a u eon he ulne abili yo SMEs ega dingaccess
o inancing (e.g., Aud e sch and Els on 2002;K emp
and Se es e2013; Ve moesen e al. 2013; D’Ama o
2020) in o he li e a u e ha ca es ou de e minan s
o small i ms’ esilience o changing ma ke condi-
ions (e.g., Almeida e al. 2009; Kahle and S ulz 2013;
Nicolas 2022; Escoz Ba agan and Becke 2024). We
hus ex end he li e a u e on SME inancing by p o-
iding a de ailed applica ion o measu ing inancing
cons ain s and compa ing he impac o a signi ican
economic ecession ac oss small and la ge i ms.
Ou indings hus con ibu e o an impo an pol-
icy deba e. Eu opean policymake s s ess he need o
imp o e access o inancing p ima ily o small i ms
o s imula e in es men and employmen . In his con-
ex , ou esul s sugges ha a mo e di e en ia ed iew
on he opic would be app op ia e o add ess he issue
o inancing cons ain s e ec i ely. While ou esul s
con i m ha SMEs a e indeed mo e bank-dependen
and ha e a highe de aul isk han hei la ge coun e -
pa s, i m size is no equally impo an in de e mining
inancing cons ain s du ing ecessions. These aspec s
sugges ha policymake s should be mos conce ned
wi h he unde lying causes o wha is pe cei ed as he
liabili ies o smallness, ins ead o ocussing ca ego -
123
453
D. Helle e al.
ically on i m size, o e ec i ely suppo small busi-
nesses.
The pape is o ganized as ollows. Sec ion2p esen s
ou da a, p o ides desc ip i e s a is ics, and ou lines
he ins i u ional backg ound. Sec ion3desc ibes ou
me hodological app oach in de ail. Sec ion4p esen s
he main esul s, including model ex ensions. Sec ion5
discusses he implica ions, gene alizabili y, and limi a-
ions o ou analysis. Sec ion6concludes.
2 Da a and desc ip i es
2.1 The da ase
The empi ical analysis is based on p op ie a y i m-
le el mic oda a p o ided by he Ge man Bundesbank,
he so-called USTAN da abase. The da abase con ains
de ailed in o ma ion on Ge man non- inancial i ms
(e.g., b anch, legal o m, indus y) and hei annual
inancial s a emen s, including p o i and loss accoun s
and he asse his o y. The USTAN da abase has been
collec ed annually since 1987 and mainly comp ises
small- and medium-sized i ms. Bundesbank collec s
hese i m-le el da a wi hin he scope o i s e inanc-
ing ope a ions, esul ing in high-quali y, g anula da a
(see Becke e al. (2019) o mo e de ails). Table 4
(Appendix 1) lis s he o iginal a iables (Panel A) and
de ines he co esponding a iables used h oughou
ou analysis (Panel B).3
We use he USTAN da abase o cons uc wo main
da ase s. We exclude all i ms ac i e in he inancial,
insu ance, and se ices sec o s and hose ha do no
epo in o ma ion on hei sec o . We also d op obse -
a ions wi h below 10,000 Eu o o a e age asse s pe
employee o less han i e employees because we can-
no easonably assume hem o ep esen i ms ha
ac i ely pa icipa e in inancial ma ke s.4Fo classi-
ying SMEs, i s subca ego ies, and la ge i ms, we ol-
low he ecommenda ion o he Eu opean Commission
3Due o signi ican con iden iali y es ic ions, i has p o en
impossible o us o link he i m-le el da a wi h bank-le el in o -
ma ion,such ha hesupply-side a iableswillbebased on i ms’
balance shee in o ma ion.
4Indeed, abou wo- hi ds o he i ms wi h less han i e
employees in he aw da a do no hold any bank loans. Excluding
hese i ms implies ha ou sample does no comp ise many s a -
ups bu a he well-es ablished SMEs. We e lec on his cha -
ac e is ic in ou empi ical analysis and he discussion sec ion.
(2003/361/EC) on he de ini ion o small- and medium-
sized en e p ises. Fo any gi en yea , i ms a e classi-
ied as SMEs once hey ha e less han 250 employees
and a balance shee o al o a maximum o 43 million
Eu os. I hey exceed hese h esholds, hey a e classi-
ied as la ge i ms. See Table 5 (Appendix 1) o mo e
de ails on he de ini ions and he sample dis ibu ions.
We exclude i ms ha canno be uniquely iden i ied
as belonging o ei he SME ca ego y. Roughly 75%
o sample i ms a e ca ego ized as mic o-, small-, o
medium-sized. This numbe is ce ainly lowe han he
ac ualsha e o SMEs in Ge many.Howe e ,ou sample
c i e ia enable us o p ese e he mos ele an obse a-
ions while main aining a ich enough basis o conduc
a ho ough analysis.
Fo he main analyses o he impac o he Financial
C isis on Ge man i ms, we es ic he ime ame o
he yea s 2006–2010, cap u ing bo h he boom pe iod
be o e as well as he bus pe iod a e 2008. To a oid
su i o ship bias, we allow i ms o en e and lea e
he da abase eely as long as hey do no en e a e
2008.The esul ing da ase co e s74,561obse a ions,
equi alen o 18,113 i ms, o he pe iodo 5yea s. The
sec o al dis ibu ions o i ms a e displayed in Table 6
(Appendix 1).
Fo he supplemen a y analysis o i ms’ eco e y,
we cons uc a second da ase based on he main sam-
ple desc ibed be o e. He e, we make wo adjus men s.
Fi s , we ex end he sample by adding obse a ions o
heyea s 2011–2015.Mo e speci ically,we addda a o
i ms obse ed any ime be ween 2006 and 2010. As a
second adjus men , we only conside i ms ha a e e y
likely o ace inancing cons ain s du ing he ecession
(i.e., in 2009) o align he da a o assess he eco e y
o inancially cons ained i ms.5This subsample con-
sis s o 4203 i ms, co esponding o 50,362 i m-yea
obse a ions o he pe iod 2006–2015.
2.2 Desc ip i es
Desc ip i e s a is ics on se e al inancial i ems in Table
1p o ide he i s insigh s on key di e ences among
SMEsand la ge i ms by compa ing basic balance shee
cha ac e is ics ac oss i ms. In Panel A, se e al ac o s
5In pa icula , we conside bo h SMEs and la ge i ms ha ha e
a leas a 75% chance o being inancially cons ained, acco ding
o ou disequilib ium es ima ions in Sec ion 3.
123
454

Small and ulne able du ing c ises? Fi m size and inancing...
Table 1 Desc ip i e s a is ics by i m size ca ego y (SMEs s la ge i ms)
Panel A: Compa ing basic i m cha ac e is ics
All SME La ge
Bank- loan a io 0.222 0.234 0.189
Bo owing di e si y 0.372 0.385 0.333
P o i abili y 2.358 2.536 1.835
In e nal unds 0.094 0.103 0.069
Capi al expendi u es 0.054 0.053 0.057
Acc. ecei ables 0.296 0.301 0.283
Colla e al 0.308 0.281 0.386
Fi m size 9.284 8.454 11.725
Public (in %) 7.21 2.80 20.19
Bonds (in %) 3.15 1.03 9.39
Panel B: Composi ion o he liabili y side
Ca ego y All SME La ge
Bank deb 0.298 0.308 0.268
Bank deb (sho - e m) 0.160 0.173 0.121
Bank deb (long- e m) 0.138 0.135 0.147
T ade c edi 0.209 0.211 0.201
Bonds 0.004 0.002 0.012
Nonbank c edi 0.183 0.189 0.165
P o isions 0.183 0.163 0.242
O he liabili ies 0.123 0.127 0.112
To al 1.000 1.000 1.000
No es: This able shows mean alues o se e al inancial a iables in he main sample, displaying alues o all i ms, SMEs, and
la ge i ms in Columns I–III, espec i ely. All a iables a e de ined in Panels A and B o Table 4 (Appendix 1). In his able, Panel A
displays cha ac e is ics de i ed om balance shee i ems. Panel B shows he a e age composi ion o he liabili y side o sample i ms’
balance shee s. All a iables a e de ined as he balance shee posi ions aken om Bundesbank (see Panel A Table 4) as a ac ion o
o al liabili ies. Unless indica ed o he wise, liabili y i ems a e agg ega ed including bo h sho - and long- e med liabili ies. Please no e
ha da a p o ec ion conce ns p ohibi o display mo e g anula desc ip i e s a is ics (e.g., on min max alues). Da a sou ce: Resea ch
Da a and Se ice Cen e o he Deu sche Bundesbank (DOI: 10.12757/Bbk.Us an.8719.05.04), Mic oda abase USTAN 2006-2015, own
calcula ions
indica e ha he a e age small i m is mo e dependen
on bank deb han i s la ge coun e pa s. Fo example,
small i ms hold highe le els o bank deb , a e less
likely o be ac i e on capi al o bond ma ke s, and ha e
an o e all highe concen a ion on ewe deb sou ces,
as indica ed by he bo owing di e si y sco e.6Fu he ,
se e al cha ac e is ics indica e ha SMEs a e likely o
be iskie bo owe s han la ge i ms. The le el o isk
can be in e ed om sligh ly highe le els o accoun s
6We compu e his index, ollowing (Tengulo , 2019)which
measu es he concen a ion o di e en deb ypes. La ge al-
ues e lec a highe dispe sion in deb sou ces and, hus, a highe
concen a ion on ewe inancing sou ces. Table 4 (Appendix 1)
lis s and de ines all a iables.
ecei able (as an indica o o he abili y o collec pay-
men s), lowe a ailabili y o colla e al (as measu ed by
angible asse s), which is e lec ed in highe ope a ing
isk, and lowe holdings o angible asse s (i.e., po en-
ialcolla e al). All di e ences men ioned abo e a e s a-
is ically signi ican a he 1% le el, as (un epo ed)
- es s show. Rega ding inancing needs, desc ip i es
show simila capi al expendi u e le els among SMEs
andla ge i ms. Theses a is ics indica e ha small i ms
a e ypically on a di e en s age o he i m li e cycle,
which is con i med by he di e ences in he mean age
and highe g ow h a es, i.e., p o i abili y a es. All
di e ences a e s a is ically signi ican a he 1% le el
(un epo ed).
123
455
D. Helle e al.
In Panel B, we ake a close look a he composi-
ion o he liabili y side o i ms’ balance shee s, using
liabili y a ios o di e en balance shee i ems. We
obse e smalle i ms o ha e a much highe sho - e m
bo owing (17.3 e sus 12.1% o liabili ies), whe eas
la ge i ms ob ain mo e long- e m deb . O e all, how-
e e , he sha e o o al bank deb is highe o small
i ms.Mo eo e ,a muchlowe ac iono bonds esem-
bles he quasi-absence o small i ms in hose ma ke s.
These s ylized desc ip i es mi o he limi ed numbe
o inancing sou ces and s onge dependence on bank
inancing o small i ms, as p oposed in p e ious li e -
a u e (e.g., Faulkende and Pe e sen 2006). Especially
when conside ed in combina ion wi h he cha ac e is-
ics displayed in Panel A, s a is ics om Panel B illus-
a e why smalle i ms a e commonly assumed o be
mo e dependen on bank inancing and, hus, mo e ul-
ne able o exogenous shocks in he loan supply.
2.3 Ins i u ional backg ound: he inancial c isis in
Ge many
In he ollowing, we ou line he ins i u ional con ex o
ou empi ical analyses. Sho ly a e he inancial c i-
sis shocked inancial ma ke s in he US a he end o
Sep embe 2008, i spilled o e o he Eu opean inan-
cial sec o . Because o he global in ol emen o Ge -
man inancial ins i u ions in he global c edi ma ke ,
he Ge man inancial and c edi sys em began o al-
e , e en ually o cing he s a e o launch a 500 billion
Eu os escue p og am o he inancial indus yin Oc o-
be 2008. Subsequen ly, demand o Ge man indus ial
p oduc s and in e na ional inancial ma ke s collapsed
massi ely, slowing GDP g ow h o 1.0% in 2008 and a
slumping −5.7% in 2009. Howe e , business expec a-
ions eco e ed om an all- ime low, indica ing a pos-
i i e ou look by he i s qua e o 2010 (I o Ins i u e
2019).
An impo an aspec o ou analysis is he e ec
o he Financial C isis on bank lending in Ge many.
Figu e1illus a es he pe cei ed bank lending condi-
ions a he ime by plo ing he i m size-speci ic I o
C edi Cons ain Indica o (I o Ins i u e, 2019). The
g aph documen s he ac ion o i ms pe cei ing he
cu en willingness o banks o ex end c edi as es ic-
i e. Du ing he pe iods o 2005 un il 2008 and 2011
un il 2012, he pe cei ed deg ee o being inancially
cons ainedamongall i mswasa a ela i elylowle el
o 20% o e all bu mo e han doubled in 2009.7In line
wi h common pe cep ions on inancing cons ain s o
small i ms (e.g., Be ge and Udell 2006), be o e 2009,
small- and medium-sized i ms we e epo edly mo e
cons ained han la ge i ms. Mo e impo an ly, how-
e e , he inc ease in pe cei ed c edi cons ain s a he
ou b eako heFinancialC isisin2009is mos subs an-
ial o la ge i ms, despi e he highe ini ial alues o
he o he wo size ca ego ies. These obse a ions con-
as he common pe cep ion ha smalle i ms a e hi
pa icula ly s ongly by ad e se economic e ec s (e.g.,
Holms öm and Ti ole 1997; Egge s 2020). Fu he ,
hese obse a ions aise he ques ion o whe he small
Ge man i ms we e indeed disp opo ionally a ec ed
by he Financial C isis and—i no —how did hey end
o he ad e se economic shock?
3 Me hodology
3.1 Conside a ions on inancing cons ain s
Financing cons ain s a e ypically no obse able, bu
se e al measu emen app oaches exis . Mos measu es
conside i m size qua de ini ion o a e only a ailable
o public i ms. This is p oblema ic o ou analysis
because we examine i ms o di e en size ca ego ies,
includingmos lyp i a e small i ms, as ou lined in Sec-
ion2.2.Ano he keychallenge o es ima ing inancing
cons ain s is disen angling supply and demand e ec s.
To sol e hese wo aspec s, we deploy a disequilib ium
me hod as implemen ed, e.g., in K emp and Se es e
(2013), Ca bo-Val e de e al. (2016), and desc ibed in
Ka apanagio is (2024). This app oach is ad an ageous
o se e al easons. Fi s , in eg al o ou esea ch ques-
ion, i does no classi y small i ms as cons ained
pe se, and i can be es ima ed o any i m. Second,
unlike s udies ha explo e in o ma ion on loan appli-
ca ions ia c edi egis ies (e.g., Can ú e al. 2022), his
app oach allows analyzing demand e ec s, including
in o ma ion on discou aged bo owe s (i.e., hose who
did no apply o loans). Thi d, ou app oach does no
ely on su ey da a o delinea e demand and supply
ac o s (as in P esbi e o e al. (2014)). Howe e , su -
eys ypically ely on speci ic selec ions and may no
include su icien inancial da a.
7To illus a e ha his obse a ion is no sou ce-speci ic, Fig.7
(Appendix 2) displays an al e na i e desc ip i e s a is ic om he
Deu sche Bundesbank’s bank lending su ey.
123
456
Small and ulne able du ing c ises? Fi m size and inancing...
Fig. 1 The Financial C isis in Ge many: Financing clima e
be ween 2006 and 2012.No es:The igu e g aphically illus a es
he esponses o he I o C edi Cons ain Indica o o manu-
ac u ing i ms. To calcula e he in ensi y o c edi cons ain s,
i ms a e asked o answe he ques ion: “How would you assess
he cu en willingness o banks o ex end c edi o businesses?”
Responden s choose be ween he answe s “accommoda ing,”
“no mal,” and “ es ic i e.” Own illus a ion based on da a om
(I o Ins i u e, 2019)
The disequilib ium model a oids hese ca ea s by
es ima ing c edi demand and supply based on i m-
le el inancial da a. Mo eo e , i p o ides us wi h a
con inuous measu e o he in ensi y o inancing con-
s ain s exp essed as he p obabili y o a i m expe i-
encing excess demand o supply.8Hence, ou app oach
concep ually dis inguishes demanded and supplied
quan i ies (Qdand Qs), desc ibed in he ollowing lin-
ea sys em:
Qd
i =Xd
i 
βd+X
i αd+εd
i ,
Qs
i =Xs
i βs+X
i αs+εs
i ,
(1)
o i m ia ime , whe e Xk
i ( o all k∈{d,s}) deno es
ec o s o explana o y a iables in he demand and he
supply equa ions. The Xi is a ec o o common con-
ols in he wo equa ions. The shocks a e assumed o be
8Tempo a y de ia ions ha lead o excess demand o supply in
he loan ma ke can be caused by cos ly in o ma ion ga he ing
and p ocessing and by he menu cos s o banks (Mackowiak &
Wiede hol , 2009; Mankiw & Reis, 2002) As such, in o ma ion
asymme ies impede a p ope assessmen o whe he changes in
he demand o loans a e empo a y, idiosync a ic, o uni o m o
he whole ma ke . Mo eo e , menu cos s induce banks o de ine
a a ge e ail a e as a unc ion o long- e m ma ke in e es a es.
bi a ia e no mally dis ibu ed wi h εd
i ∼N(0,(σd)2),
εs
i ∼N(0,(σs)2), and whe e he co ela ion o εd
i
and εs
i is ρ(which we migh se equal o ze o). Ou
app oach combines he equa ions o he sys em Eq. 1
wi h he ollowing condi ion:
Qi =min{Qd
i ,Qs
i },(2)
whe e Qi is he obse ed amoun o loans ha esem-
bles he minimum o demanded o supplied loans. This
exp ession implies ha he obse ed quan i y belongs
ei he o he demand side o he supply side in Eq.1.
Since his ac canno be di ec ly obse ed, he model
uses a log-likelihood me hod o p edic hypo he ical
quan i ies o bo h demand and supply ( ˆ
Qd
i and ˆ
Qs
i ).
In o he wo ds, he log-likelihood me hod whe e Eqs.1
and 2a e es ima ed simul aneously gi es o each
obse a ion in ou panel da a, a p obabili y whe he
i belongs o Qdo Qs.
Based on he ou pu o hese es ima ions, we con-
s uc wo measu es o he in ensi y o inancing con-
s ain s. Fo he i s measu e, we s a wi h he ollow-
123
457
D. Helle e al.
ing exp ession:
θi =
ˆ
Qd
i −ˆ
Qs
i
ˆσ2
d+ˆσ2
s−2ˆσdˆσsˆρ
.(3)
The θi is he expec ed excess demand o i m iin
pe iod . In o he wo ds, θi is a non-bina y measu e
o he in ensi y o inancing cons ain s, which we no -
malize by he s anda d de ia ion o he di e ence o he
demandandsupplyshockses ima e o all obse a ions
in he sample. Wi h his exp ession a hand, we hen
calcula ed he p obabili y o esembling a inancially
cons ained i m in a gi en yea o each obse a ion
ollowing Maddala and Nelson (1974, Eq. 2.2). The
p obabili y o an obse a ion ep esen ing a inancially
cons ained i m is equal o he p obabili y o he i m
being in an excess demand egime (wi h deno ing
he s anda d no mal dis ibu ion), i.e.,
ˆπd
i =P(Qd
i >Qs
i )=(θi ).(4)
Ou second measu e speci ies a s a is ic alue o
excess demand by he di e ence be ween expec ed
excess demand and supply ela i e o he expec ed sup-
ply o loans.Thismeasu ecap u es heex en o excess
demand, i.e.,
Fi =
ˆ
Qd
i −ˆ
Qs
i
ˆ
Qs
i
.(5)
In Fi , he es ima ed excess demand is no malized by
expec ed supply, which is obse a ion-dependen and,
hus, idiosync a ic. Jus like θi ,Fi is independen o
he uni o measu emen . By eg essing Fi onase
o independen a iables, we can in es iga e whe he
size cha ac e is ics a e indeed ele an in explaining a
po en ial inc ease in inancing cons ain s h oughou
he inancial c isis.
3.2 Va iable speci ica ions and es ima ion esul s o
he disequilib ium model
As he main dependen a iable, Qi , we speci y i ms’
bank-loan a ios as he end-o - he-pe iod o al amoun
o loans owed o c edi ins i u ions as a ac ion o o al
asse s. In he ollowing, we de ine de e minan s o he
demandand supply o loans. To allow o iden i ica ion,
we ha e o make a quali ied selec ion o a iables in
each o he wo equa ions, i.e., imposing an exclusion
es ic ion (see, e.g., Ca bo-Val e de e al. 2016). Table
4 (Appendix 1) con ains an o e iew o all a iables o
ou empi ical model.
Demand o bank inancing is pa icula ly a ec ed
by i s p ice and he a ailabili y o o he , less expensi e
subs i u es because ex e nal deb inancing is a ela-
i ely cos ly unding op ion (Lo e e al., 2007; Mye s
& Majlu , 1984). We, he e o e, model loan demand
as a unc ion o he in e es a e and inancing al e na-
i es.9Fo he inancing al e na i es,weconside i ms’
in e nal unding ia cash lows. Fu he , we conside
i ms’ capi al expendi u es as a mo e di ec measu e
o i ms’ (long- e m) inancing needs. Mo eo e , i ms
wi h di e si ied deb s uc u es a e less ulne able o
economic slowdowns (Gianne i, 2019), which is why
we inco po a e a measu e o i ms bo owing di e si y.
The supply-side de e minan s ela e o de aul cos s
exp essed as he isk associa ed wi h he po en ial bo -
owe (F eixas & Roche , 2008). We hus ollow ela ed
s udies, such as (K emp & Se es e, 2013), and con-
side h ee a iables ha e lec less isky and less
ola ile cash lows, all o which should ansla e o
a highe willingness o banks o supply loans: (i) he
sha e o accoun s ecei able o o al asse s as an indi-
ca o o i ms’ abili y o collec paymen s on hei busi-
ness ac i i ies (i.e., lowe liquidi y isk), (ii) he a ail-
abili y o colla e al as measu ed by i ms’ s ock o an-
gible asse s, and (iii) p o i abili y, as measu ed by he
e u ns o asse s.10
Fu he , we acknowledge ha se e al co a ia es
a ec loan demand and supply simul aneously. Fi s ,
i m size helps o con ol o he i m-speci ic isk
and he need o bank deb , he eby add essing bo h
loan demand and supply ac o s. Second, con olling
o ime ixed e ec s (yea - e) is impo an because
i allows, among o he s, o con ol o he e inanc-
9We impu e a hypo he ical in e es a e o i ms wi h ze o loans
using a coa sened exac ma ching (CEM) p ocedu e o obse -
a ions wi hou ou s anding bank loans. This applies o 24% o
ou sample i ms. Appendix 3 elabo a es on his in de ail. Fo
obus ness, ou analyses con ain esul s o i ms wi h and wi h-
ou impu ed in e es a es.
10 Fu he , ou speci ica ion inco po a es he ac ha banks se
p ices acco ding o bo owe s’ isk and no demanded quan i ies,
i.e., banks i s decide how much hey a e willing o lend be o e
hey se in e es a es (K emp & Se es e, 2013). We ollow his
conside a ion and do no include in e es a es as a supply-side
de e minan o lending.
123
458
Small and ulne able du ing c ises? Fi m size and inancing...
Fig. 3 Sho - e m adjus men s o igh ened inancing con-
s ain s, SMEs s la ge i ms.No es: The igu e plo s coe icien s
o h ee sepa a e eg essions, each o which es ima es Eq.7. Es i-
ma ions use h ee di e en samples: (1) ull sample, (2) SMEs,
and (3) la ge i ms. The g aph plo s he espec i e βcoe i-
cien s o each o he subsamples. The dependen a iables a e
bank-loan a ios (A), he bo owing di e si y index (B), and he
cash and cash equi alen s o he o al asse a io (C). All a i-
ables a e de ined in Table 4 (Appendix 1). 2006 is he e e -
ence yea . Whiske s ep esen 95% con idence in e als. S an-
da d e o s a e he e oscedas ici y-consis en and clus e ed a he
i m le el. Da a sou ce: Resea ch Da a and Se ice Cen e o he
Deu sche Bundesbank (DOI: 10.12757/Bbk.Us an.8719.05.04),
Mic oda abase USTAN 2006–2015, own calcula ions
i e and signi ican , whe eas i is insigni ican o la ge
i ms. No ably, howe e , he o e all de elopmen o an
inc eased concen a ion on ewe deb sou ces al eady
un olded in 2008, whe eas he c isis mainly a ec ed
Ge man i ms in 2009. Hence, he concen a ion on
ewe inancing sou ces may also e lec he lexibili y
o he i ms o eac ea ly on o he declineinbusiness.13
Fu he mo e, we in es iga e whe he SMEs ac ually
mi iga e he ad e se shock o he Global Financial C i-
sis by p uden beha io , i.e., by adjus ing hei holdings
o cash and cash equi alen s. Fi ms, and in pa icula
smalle ones, a e ound o be mo e likely o be liq-
uida ed when hey a e in inancial dis ess (Ozkan &
Ozkan, 2004), which migh induce hem o inc ease
cash holdings o a oid inancing dis ess in he i s
place. This p ecau iona y e ec may occu in esponse
o a sudden shock (e.g., Dessain and Ma ay 2017).
Panel C shows ha i ms indeed s ongly inc eased
cash holdings in 2009. The e ec is highly signi ican
and ansla es oughly o a 20% inc ease in cash o
he median SME. The e ec holds o bo h SMEs and
la ge i ms; highe associa ed cos s o inancial dis-
ess can explain why i ms build up cash bu e s as
a eac ion o he o e all slowdown in economic ac i -
i y (Kahle & S ulz, 2013). Mo eo e , we ind ha bo h
small and la ge i ms dec ease hei capi al expendi-
u es wi h he onse o he Financial C isis in a e y
simila manne (see Fig.9B in Appendix 2). No ably,
also he impac on capi al expendi u es appea s i u-
ally equi alen o small and la ge i ms. Agains he
backg ound o ou p e ious esul s, his sugges s ha
i ms subs i u e ex e nal unding by building up cash
bu e s.
4.4 Longe - e med implica ions
Whe eas ou p e ious analyses ocus on he ini ial
impac o he Global Financial C isis on i ms’ inan-
cial posi ions, i is easonable o assume ha some
e ec s—including eco e y p ocesses—a e only is-
ible om a longe - e med pe spec i e. In he ollow-
ing, we ex end ou analysis by s udying he pos -c isis
13 Fo example, he da a mi o agg ega e s a is ics om he
I o Business Clima e Index, which sepa a ely epo s business
expec a ions and he cu en business si ua ion (see Fig.9A
in Appendix 2). Al hough he cu en business si ua ion only
declined in 2009, expec a ions al eady wo sened as o he sec-
ond hal o 2008.
123
465

D. Helle e al.
pe iod un il 2015. Mo e speci ically, we ocus on hose
i ms iden i ied by he disequilib ium es ima ions as
being inancially cons ained du ing he ecession yea
2009. I inancing cons ain s du ing c ises lead only
empo a ily o wo se pe o mance, hese i ms should
ha e eco e ed wi h he economy eco e ing as well.
Hence, analyzing i ms ha aced inancing cons ain s
in 2009 and dis inguishing be ween SMEs and la ge
i ms will p o ide a mo e comple e pic u e o he impli-
ca ions o he c isis on hese i ms.
The e o e, we ex end ou main sample by adding
obse a ions o 2011–2015 as desc ibed in Sec ion 2.
Again, we conside SMEs and la ge i ms whose p ob-
abili y o being inancially cons ained as de ined in
Eq. 5is equal o o la ge han 75%. This way, 4203
indi idual i ms, o 28.1% o all i ms in he sample, a e
lagged as inancially cons ained in 2009. The ac ion
o SMEs ha classi y as cons ained (31.0%) is highe
han he ac ion o la ge i ms (18.7%), which is con-
sis en wi h ou p e ious analysis, e.g., Fig.2.Using
he ex ended sample, we es ima e he long- e m e o-
lu ion in inancing and o he economic ac i i ies o
inancially cons ained SMEs and la ge i ms by ees i-
ma ing Eq.7. Mo eo e , we use wo se s o ou comes as
dependen a iables ha ela e o he (a) inancing and
(b) eal economic ac i i ies o i ms, which a e summa-
izedin Figs.4and5, espec i ely. Simila o be o e, we
plo he yea ly coe icien s om he e en -s udy- ype
eg essions.
Rega ding inancial ac i i ies, in Fig.4, we assess
h ee speci ic ou comes. Fi s , in Panel A, we use i ms’
bank-loan a ios as he dependen a iable and obse e
he dele e aging end o e he en i e ex ended sam-
ple pe iod. This obse a ion is consis en wi h ecen
empi icale idence om SMEsin he US ha indlowe
use o deb inancing as a pe sis en long- e m end
since he 1980s (e.g., Dell’A iccia e al. 2021). How-
e e , we ind no s a is ically signi ican di e ence in
his end be ween SMEs and la ge i ms, sugges ing
ha he dele e aging applies equally o i m size ca -
ego ies. Second, in Panel B, we in es iga e bo ow-
ing di e si y: Du ing he c isis yea s, i ms appea o
concen a e inc easingly on ewe sou ces o ex e nal
inancing, including he p e iously obse ed an icipa-
o y e ec in Sec ion 4.3; a he la es by 2013, i ms
e e o p e-c isis le els o bo owing di e si y. As an
impo an inding, his is again e y simila among con-
s ained SMEs and cons ained la ge i ms. Consis en
wi h Gianne i (2019), his inding sugges s he c ucial
ole o deb concen a ion du ing imes o economic
dis ess. Thi d, in Panel C, we use he cash- o-liabili y
a io as he dependen a iable. SMEs inc eased hei
cash holdings wi h he onse o he c isis in 2009. In
he a e ma h o he c isis, hey ini ially lowe ed hese
amoun s sligh ly bu inc eased cash holdings he e-
a e . This pa e n is di e en om la ge i ms: They
inc eased cash holdings in 2009, bu unlike smalle
i ms, la ge i ms educed hese cash holdings by 2011
o p e-c isis le els and main ained hose un il 2015.
These indingssugges ha inanciallycons ainedGe -
man i ms espond o c ises by building up cash bu e s
o s eng hen hei inancing posi ion. This obse a ion
would be in line wi h o he s udies on he esponse
o i ms and manage s o adjus inancing posi ions in
esponse o ad e se shocks (e.g., Kahle and S ulz2013;
Dessain and Ma ay 2017). On op o his, SMEs build
up hese bu e s e en mo e pe sis en ly. Combining he
h ee indings o sus ained dele e aging, an inc ease in
cash holdings, and no change in bo owing di e si y in
he longe e m sugges s ha i ms, and in pa icula
SMEs, po en ially subs i u e cash o deb .
As a nex s ep, we in es iga e he e olu ion o inan-
cially cons ained i ms’ eal economic ac i i ies, mea-
su ed in e ms o i m p o i abili y, capi al expendi-
u es,andemploymen .Figu e5showsa consis en pic-
u e ac oss hese h ee dimensions; ha is, he a e age
cons ained i m exhibi s lowe le els o eal ac i i ies
du ing he c isis pe iod.14 Mo eo e , bo h cons ained
SMEs and la ge i ms in ou sample eco e ed wi h
inc eased p o i abili y immedia ely a e he c isis in
2011 (Panel A). Simila ly, employmen a es e e ed
o p ec isis yea s immedia ely a e he c isis (Panel B).
Howe e , some o he longe - e m implica ions di e
ac oss i ms. As such, Panel C shows di e ences in he
eco e y ega ding capi al expendi u es. Cons ained
SMEs e e ed o p ec isis le els by 2010. Al hough
his e e sal is pe sis en o e ime, he le el o in es -
men o cons ained la ge i ms emains a he lows o
he c isis. Fo obus ness, we back all o hese obse -
14 Rega ding po en ial i m ailu es, we obse e ha 24.2% o
SMEs and 23.7% o la ge i ms ac i e in 2007 d opped ou o
he sample by 2012. Howe e , he me e ac ha i ms a e s ill
ali e does no ule ou weak pe o mance. As such, i has been
shown ha many i ms su i e c ises bu emain in a zombie-like
s a e in he a e ma h o economic slowdowns (e.g., Acha ya e
al. 2019).
123
466
Small and ulne able du ing c ises? Fi m size and inancing...
Fig. 4 E olu ion o
inancing ac i i ies by
cons ained SMEs and la ge
i ms (2006–2015).No es:
The igu e displays he
e olu ion o changes in
inancing ac i i ies
di e en ia ing be ween
inancially cons ained
SMEs and cons ained la ge
i ms. The g aphs plo
coe icien s (β) simila o
hose on es ima ions o
Eq.7, only he e we use an
ex ended sample, co e ing
he yea s 2006–2015. The
dependen a iables a e
speci ied as be o e:
Bank-loan a io (A),
bo owing di e si y (B), and
i ms’ cash holdings,
measu ed as
cash- o-liabili y a io (C).
The coe icien s plo ed a e
o each yea , ela i e o
2007. Whiske s ep esen
95% con idence in e als.
S anda d e o s a e
he e oscedas ici y-
consis en and clus e ed a
he i m le el. Da a sou ce:
Resea ch Da a and Se ice
Cen e o he
Deu sche Bundesbank (DOI:
10.12757/Bbk.Us an.8719.05.04),
Mic oda abase USTAN
2006-2015, own
calcula ions
123
467
D. Helle e al.
Fig. 5 Long- e m impac on eal ac i i ies o cons ained SMEs
and la ge i ms (2006–2015).No es: The igu e displays he e o-
lu ion o changes in eal economic ac i i ies simila o Fig.4.
The dependen a iables a e p o i abili y measu ed as EBIT o e
o alasse s(A),in es men measu edascapi alexpendi u eso e
o al asse s (B), employmen measu ed using he loga i hm o
he numbe o o al employees (C), and i m-le el ma kups mea-
su ed by di iding o al ope a ing income by ope a ing expenses
(D). The coe icien s plo ed a e o each yea , ela i e o 2007.
Whiske s ep esen 95% con idence in e als. S anda d e o s
a e he e oscedas ici y-consis en and clus e ed a he i m le el.
Da a sou ce: Resea ch Da a and Se ice Cen e o he Deu sche
Bundesbank, Mic oda abase USTAN 2006–2015, own calcula-
ions
a ions by es ing al e na i e speci ica ions o he mea-
su es o p o i abili y, g ow h, and capi al expendi u es
(see Fig.10 in Appendix 2). Summa ized, cons ained
SMEs and la ge i ms appea o espond simila ly a
he onse o he c isis, a pa e n con i ming agg ega e
s a is ics in oduced in Sec ion 2. On op o his, we
ind eco e y pa e ns o be compa able. I any hing,
he eco e y o SMEs is s onge , in pa icula ega d-
ing in es men a es in he o m o capi al expendi u es.
As a inal s ep, we also in es iga e changes in he
ma kups o espec i e i ms. Acco ding o Meinen and
Soa es (2022), i ms ha a e mo e exposed o liquidi y
isks, especially inancially cons ained i ms, end o
aise ma kups in esponse o ad e se bank-loan supply
shocks o sus ain liquidi y. We measu e ma kups as he
sha e o income om ope a ing ac i i ies o e ope a -
ing expendi u es. Figu e 5D again plo s es ima es o β
coe icien s in es ima ing Eq.7, his ime using i m-
le el ma kups as he dependen a iable. Using i m-
le el ma kups as a dependen a iable shows ha SMEs
indeed inc eased ma kups du ing 2009 and 2010 while
e e ing o 2006 le els om 2011 onwa ds. This pa -
e n is well in line wi h Meinen and Soa es (2022).
Howe e , we do no ind s a is ically signi ican pa -
e ns like his o la ge i ms.
The abo e e idence s ongly sugges s ha SMEs
sus ained he nega i e impac o he Global Finan-
cial C isis by inc easing ma kups, sho - e m di es -
men , and a sus ained accumula ion o cash holdings.
Whe eas hese pa e ns apply also o la ge i ms, hey
123
468
Small and ulne able du ing c ises? Fi m size and inancing...
a e mos p onounced o SMEs. These indings high-
ligh po en ial mechanisms o how small i ms can
cope wi h ad e se economic shocks. Mo eo e , among
se e al measu es, we do no de ec signi ican di -
e ences in o he inancing ac i i ies o pe o mance-
and g ow h- ela ed ou comes be ween SMEs and la ge
i ms.
5 Discussion
5.1 Con ibu ions and implica ions
Ou analyses p o ide new insigh s in o a cen al ques-
ion in he li e a u e o small business economics: How
do small i ms cope wi h changes in hei business en i-
onmen , and o wha ex en a e hey capable o sus-
ain ad e se economic shocks? The adi ional iew
on he liabili ies o smallness posi s ha smalle i ms
a e esou ce-cons ained, especially in e ms o inan-
cial asse s and skilled pe sonnel (Ald ich & Aus e ,
1986; F eeman e al., 1983). A common pe cep ion is
ha hese liabili ies lea e small i ms mo e ulne a-
ble o slowdowns in economic ac i i y (see Holms öm
and Ti ole 1997; Faulkende and Pe e sen 2006; Egge s
2020). Ou wo k co obo a es he ac ha SMEs we e
signi ican ly hi by he inancial c isis (see, e.g., Udell
2020). Impo an ly, hese e ec s we e no disp opo -
ionally mo e se e e o SMEs han o la ge i ms in
Ge many. Ou esul s also sugges ha SMEs dynami-
cally adjus hei ope a ions in esponse o he c isis. In
pa icula , hese adjus men s include sho - e m di es -
men ha yields cash accumula ion as well as inc eas-
ing ma kups.
Ou s udy con ibu es o empi ical and heo e i-
cal conside a ions on he ole o small o ganiza ions
in changing economic en i onmen s. In pa icula , a
p ominen s eam o ela ed li e a u e desc ibes he
dynamico ganiza ionalcapabili ies o small businesses
(Nicolas, 2022; Raymond & S -Pie e, 2013; Wai e al.,
2022).He e, he e m smallness is no only linked o lia-
bili ies bu also o capabili ies, such as ope a ional lex-
ibili y. As such, he o ganiza ional s uc u es o small
i ms a e less complex and hie a chical han hose o
la ge pee s, implying be e abili ies o adap o chang-
ing business en i onmen s. In his con ex , exis ing
wo k o en ocuses on di e en o ms o echnology
adop ion (B uque & Moyano, 2007; Escoz Ba agan
& Becke , 2024; Hu e al., 2023; Ku nia e al., 2015).
In con as , ou analysis con ibu es o he li e a u e by
demons a ing he lexibili y o SMEs o adjus ope -
a ions and hei unde lying wo kings du ing imes o
economic u bulence.The eby,weo e anuanced iew
on he adi ional pe spec i e o he liabili ies o small-
ness as we show di e en mechanisms o how small
i ms can na iga e h ough imes o economic dis ess.
These insigh s ha e se e al impo an p ac ical and
policy implica ions. They con ibu e o he discussion
o how new small i ms can o e come esou ce con-
s ain s, especially du ing u bulen imes. Ou indings
help o gain a be e unde s anding o he unde lying
wo kings o how small i ms can o e come hei liabili-
ies o smallness, o e ing guidance o decision-make s
inSMEs: We sugges manage s o ocuson he dynamic
capabili ies o hei i ms in o de o sus ain economic
u bulences mo e e ec i ely.
Mos di ec ly, we con ibu e o an ongoing deba e
among policymake s and esea che s on he ulne a-
bili y o SMEs (Aud e sch, 2002; Egge s, 2020). Pol-
icymake s and academics ha e inc easingly ocused
on he inancing condi ions o small i ms. Fo exam-
ple, Fig.6 (Appendix) shows ha abou e e y o he
speech by espec i e ECB p esiden s in he a e ma h
o he Global Financial C isis discussed SMEs’ access
o c edi . Ou insigh s in o his deba e a e c ucial, gi en
he signi ican policy ini ia i es launched in he ad en
o he c isis. In his in amous speech, he o me ECB
p esiden Ma io D aghi announced he would do “wha -
e e i akes” o sa egua d he Eu opean economy and,
in pa icula , i s SMEs. As a consequence, in he US
and in Eu ope, egula o s ini ia ed massi e p og ams
in suppo o small i ms, such as he Ou igh Mon-
e a y T ansac ion (OMT) p og am by he ECB o he
T oubled Asse Relie P og am (TARP) in he US.
Resea ch has shown ha hese p og ams s imula ed
c edi supply, so ening SMEs’ inancing cons ain s
bo h in he US and Eu ope (e.g., Li 2013; Fe ando e
al. 2019; Udell 2020). Unsu p isingly, hese la ge-scale
p og ams s imula ed access o bank inancing and s a-
bilized he banking sec o as a whole. Ye , mos s udies
emain silen on he e iciency o he espec i e p o-
g ams. In ac , e idence sugges s ha he ECB’s OMT
p og am led o c edi misalloca ions ha slowed eco-
nomic eco e y (see Acha ya e al. 2019). Ou ind-
123
469
D. Helle e al.
ings co obo a e his pe spec i e, sugges ing ha poli-
cymake s should place mo e emphasis on speci ic cha -
ac e is ics o bank-dependen i ms o de ine po en ial
exposu es o c ises ins ead o me e size delinea ions.
This aspec is pa icula ly impo an gi en he s ong
ocus o policymake s on designing s uc u al help p o-
g ams using me ely size-based measu es. We hus p o-
ide new insigh s in o he unde lying easons why he
massi e policy ini ia i es in he a e ma h o he Global
Financial C isis lacked p ecision.
5.2 Gene alizabili y, limi a ions, and u u e esea ch
Financial c ises ma k ex ao dina y pe iods ha can
undamen ally a ec i m dynamics. Ou empi ical
analysis elies on one speci ic c isis and one speci ic
se o i ms— he G ea Financial C isis and Ge man
SMEs. S ill, i s implica ions a e likely gene alizable o
o he c ises and o he ypes o i ms.
The esul s o ou analysis a e likely applicable o
o he c ises, including equally signi ican shocks like
he COVID-19 pandemic. In gene al, ecessions ypi-
cally hi i ms wi h a sudden decline in demand o hei
ou pu . Unde hese condi ions, i m e enues ypically
d op, while hei obliga ions o co e ope a ing cos s
and o se e c edi o s and supplie s emain (see, e.g.,
Gou inchas e al. 2020). In wha ollows is ha eco-
nomic ac i i y is shaped by unce ain y un il demand
e en ually eaches a p e-c isis le el. Along hese lines,
he G ea Financial C isis is no no ably di e en o
o he c ises, such ha he gene al wo kings o how
SMEs eac o i a e likely simila . Wha is di e en ,
howe e , is he igge ing ci cums ances and he se e -
i y o he c isis. Impo an in e ms o gene alizabil-
i y is he magni ude o he Global Financial C isis. In
his ega d, ou se ings s and ou as we ocus on a
pa icula ly ha sh c isis (see Sec ion 2.3). Ou esul s
highligh he esilience o Ge man SMEs du ing hese
imes, sugges ing ha hey should sus ain mo e mod-
e a e ecessions as well.
In a simila ein, he indings o ou pape likely
apply o SMEs ou side o Ge many, oo. S udying
Ge man SMEs is ad an ageous gi en he impo ance
o banks as a p ima y sou ce o ex e nal inancing
o in es men s. Simila o many o he coun ies, in
Ge many, he SME sec o is o cen al impo ance
o he coun y’s economic ac i i y (Aud e sch, 2002;
Aud e sch & Els on, 2002; De Massis e al., 2018;
Egge s, 2020). Likewise, he cha ac e izing ea u es
o SMEs in Ge many (i.e., opaci y and bank depen-
dence) do no di e om hose o SMEs in o he coun-
ies. O e all, ou esul s a e, he e o e, indica i e o
o he se ings—bo h in he pas and in he u u e. Gi en
he equency in which i ms unde go economic u bu-
lences, his pape con ibu es o a cen al ques ion in
he li e a u e o small business economics.
Ne e heless, ou analysis emains subjec o ce -
ain limi a ions. Fi s , like all da a-d i en app oaches,
he gene alizabili y o ou empi ical esul s has na u-
al limi s. Ou s udy cap u es SMEs om one coun y,
implying ha indus y cha ac e is ics o he egula o y
en i onmen may cause he implica ions o di e when
conside ing o he economies, in pa icula , hose ou -
side o Eu ope (see Udell 2020). As such, he Eu o-
pean So e eign Deb c isis ha un olded in 2010 o a
subse o Eu o-a ea coun ies, excluding Ge many, ol-
lowed he inancial c isis. I igge ed a se ies o e ec s
wi hin espec i e coun ies ha likely di e om hose
obse ed in Ge many. Mo eo e , ou analysis cap u es
he inancing dynamics o al eady es ablished SMEs
o he c isis. In addi ion o his, i would be in e es -
ing o u u e esea ch o ocus mo e speci ically on
s a ups, such as en ep eneu ial en u es, and on o he
ope a ional adjus men s, like inno a ion- ela ed in es -
men s.
As ano he speci ici y, ou empi ical analysis le e -
ages highly de ailed and eliable inancial in o ma ion
om adminis a i e sou ces. The le el o g anula i y
enables us o dissec di e en dimensions o i m-le el
inancial ac i i ies o an ex en ha is ypically no pos-
sible wi h eady- o-use balance shee in o ma ion. S ill,
he high quali y o he da a comes a he cos o ha -
ing ela i ely limi ed in o ma ion on he co esponding
banks, i.e., he inancing supply side. Simila ly, he da a
unde ep esen s e y small and young i ms as hey a e
o enno subjec o he igo ous epo ing equi emen s.
An economy-wide mapping o bank- i m links a he
le el o g anula i y o ou da a would ce ainly help
u u e esea ch o u he ad ance ou unde s anding
o SME ulne abili y in imes o economic c ises.
6 Conclusion
SMEs con ibu e signi ican ly o economic g ow h and
p ospe i y. Howe e , hese i ms a e o en conside ed
pa icula ly p one o ad e se economic shocks—an
123
470

Small and ulne able du ing c ises? Fi m size and inancing...
obse a ion ques ioned by bo h anecdo al and p e ious
empi ical analysis. This pape in es iga es he dynam-
ics o inancing cons ain s, ocusing on he ole o i m
size in he Ge man economy. Ge many is his o ically
conside ed a bank-based economy and, hus, sugges s
ha he sca ci y o unding oppo uni ies s emming
om he banking sec o is a good indica ion o an ac ual
wo sening o i ms’ abili y o ob ain inancing.
Theanalysis shows ha SMEs a e no disp opo ion-
ally a ec ed by he banking c isis. Indeed, be o e and
du ing he c isis, he a e age SME exhibi ed a highe
p obabili y o being inancially cons ained. Howe e ,
we ind obus e idence ha he e ec o he c isis
on inancial cons ain s is no signi ican ly g ea e o
small i ms han o la ge ones. In he pos -c isis yea s,
we obse e a dele e aging end o bo h inancially
cons ained SMEs and cons ained la ge i ms. Rega d-
ing he longe - e m implica ions o he slowdown in
economic and inancing ac i i ies, we ind ha SMEs
pe sis en ly build up cash bu e s, po en ially subs i-
u ing cash holdings o deb . Fu he , bo h inancially
cons ained SMEs and inancially cons ained la ge
i ms eco e ed om he c isis simila ly by egaining
p o i abili y, in es men s, and g ow h.
Ou esul s highligh ha i ms’ size canno de e -
mine he in ensi y o inancial cons ain s pe se.
Ins ead, non-bank unding al e na i es and in e nal
unds a e mos impo an in mi iga ing inancial con-
s ain s. The analyses p o ide new e idence on he ul-
ne abili y o small, bank-dependen i ms in he con ex
o he la ges banking-based economy wo ldwide.
Acknowledgemen s We especially hank wo anonymous e -
e ees and edi o Julie Ann Els on o nume ous commen s and
sugges ions. We a e also hank ul o ui ul discussions and
commen s by semina pa icipan s a Copenhagen Uni e si y,
Goe he Uni e si y F ank u , No wegian School o Economics,
Annual Cong ess o he Ve ein ü Socialpoli ik (Ge man Eco-
nomicAssocia ion) 2020, he Fou hERMEES Mac oeconomics
Wo kshop 2021, he 11 h RCEA Money, Mac o, and Finance
Con e ence 2021, In e na ional Risk Managemen Con e ence
2022, and Royal Economic Socie y Annual Con e ence 2023 o
hei commen s andsugges ions. We hank heResea ch Da aand
Se ice Cen e (RDSC) o Deu sche Bundesbank in F ank u o
hei hospi ali y and suppo . The p ojec numbe a Bundesbank
is 2018 0051 and he da a was ob ained ia a secu e on-si e
access (Ga o). The a icle e lec s he opinions o he au ho s
only and does no exp ess he iew o Deu sche Bundesbank no
should i be a ibu ed o he ins i u ion. All emaining e o s a e
ou own.
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