Does the Financial Crisis Change the Effect of Financing on Investment? Evidence From Private SMEs

Abstract This paper examines the real effects of the financial crisis on private firms in the Netherlands. We find that investments of small and medium-sized private enterprises declined significantly both during and after the financial crisis. We also find that investments become less dependent on internal finance than on external finance during the crisis period. However, the impacts of the two financing sources on firm investment during the post-crisis period do not differ. The findings of the study suggest that borrowing from banks remained critical in determining the investments of private SMEs during the financial crisis of 2008–2009.