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Firm Size and Financing Behavior during the COVID-19 Pandemic: Evidence from SMEs in Istanbul

Author

Listed:
  • Aysan, Ahmet Faruk
  • Babacan, Mehmet
  • Gür, Nurullah
  • Süleyman, Selim
Abstract
This paper examines how small and medium-size enterprises (SMEs) in Istanbul managed their financial needs during the COVID-19 pandemic. A unique survey was conducted in May–June 2021 to analyze the effect of the pandemic on financial conditions and access to finance. The paper maps the differences between firms in terms of their financing conditions and behavior based on their size during the pandemic. The novel data set helps to conceptualize the impact of the COVID-19 pandemic on SMEs. The paper makes a contribution to the literature through using a large number of variables related to firms’ financial conditions and opportunities (e.g., credit restructuring, debt postponing, capital injection). The paper hypothesizes that SMEs are less likely than large firms to access formal finance opportunities, but they tend to rely more on informal financing. The empirical findings suggest that, during the pandemic, micro and small firms tend to borrow more from their acquaintances, such as relatives and friends. Micro firms are less likely to restructure their outstanding loans, borrow from banks, or inject capital. Furthermore, micro firms tend to cut their costs more to avoid further difficulty in their financial positions. Micro and small firms tend to apply for bank loans less than large firms, while medium-size firms are more likely to apply. Micro and small firms are more inclined to report difficulty in accessing credit.

Suggested Citation

  • Aysan, Ahmet Faruk & Babacan, Mehmet & Gür, Nurullah & Süleyman, Selim, 2023. "Firm Size and Financing Behavior during the COVID-19 Pandemic: Evidence from SMEs in Istanbul," MPRA Paper 116300, University Library of Munich, Germany, revised 2023.
    • Handle: RePEc:pra:mprapa:116300
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; emerging markets; finance; small and medium-size enterprises (SMEs);
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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