Abstract
The aim of the paper is to assess the impact of leverage on gazelles’ performance while controlling for firm characteristics, macroeconomic environment, and characteristics of domestic banking sectors. Using a sample of 1105 gazelles from Central, Eastern, and South-Eastern European (CESEE) countries for the period 2006–2014, we find that leverage negatively affects firm growth. The results prove to be robust regarding the use of different estimation approaches, alternatives variables for firm growth, and different sub-samples. Our results suggest that improving access to various sources and types of financing represents a key issue for supporting gazelles’ growth. We also find that macroeconomic environment and banking sector characteristics are important determinants of gazelles’ growth. The economic growth positively influences sales and total assets growth, while the effect of financial and economic development varied with the firm growth measure used. Our findings provide empirical evidence for the need of policy initiatives at national and European Union level to facilitate the growth of small businesses.
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Notes
In this paper we employed the definitions provided by Eurostat-OECD for high-growth firms (HGFs) and gazelles. HGFs are “all enterprises with average annualized growth greater than 20% per annum, over a 3 year period….Growth can be measure by the number of employees or by turnover” (Eurostat-OECD 2007, p. 61). Gazelles represent “the subset of high-growth enterprises which are up to 5 years old” (Eurostat-OECD 2007, p. 63).
According to this theory, firm growth is a purely random effect and therefore is independent of firm initial size and past growth rates.
Bulgaria, Croatia, the Czech Republic, Poland, Romania, and Serbia.
Bosnia and Herzegovina (BA), Bulgaria (BG), Croatia (HR), Czech Republic (CZ), Estonia (EE), Hungary (HU), Latvia (LV), Lithuania (LT), Macedonia (MK), Poland (PO), Romania (RO), Serbia (RS), Slovak Republic (SK), Slovenia (SI), and Ukraine (UA). In the initial interrogation of the Amadeus database, we also included other five countries from the region (Albania, Belarus, Kosovo, Moldova, and Montenegro). The results show that there are no gazelles in these countries for the period 2006–2009 that satisfy our selection criteria.
Alternative measures of a country’s financial development used in the literature are stock market capitalization, financial openness, and a composite measure of access to financial services.
Several studies found that the vast majority of SMEs in developed economies are using traditional sources of debt financing for fueling their growth. For example, Brown and Lee (2014) reported that the most common types of finance used by UK high growth SMEs are banks loans (48.6%), bank overdrafts (18.4), and risk finance - venture capital or business angel funding (4.8%).
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Appendices
Appendix 1: Leverage in selected CEESE countries
Appendix 2: Robustness check results (dependent variable - employment growth)
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Anton, S.G. Leverage and firm growth: an empirical investigation of gazelles from emerging Europe. Int Entrep Manag J 15, 209–232 (2019). https://doi.org/10.1007/s11365-018-0524-5
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DOI: https://doi.org/10.1007/s11365-018-0524-5