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Monday, August 2 • 10:45am - 12:15pm
1B2 Financial Constraints and Risk Management in Small and Medium-Sized Enterprises

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Oliver Engist, Stockholm School of Economics; Emill Bustos, Stockholm School of Economics; Gustav Martinsson, Royal Institute of Technology, Stockholm; Christian Thoman, Royal Institute of Technology, Stockholm

We study the impact of financing constraints on small and medium firms’ risk management through insurance using panel data on 16,000 firms from a large Swedish insurance company. We combine the this data with administrative data and measure financing constraints using credit scores commonly used by banks and other lenders. We find that financially constrained firms purchase more insurance. A regression-discontinuity design supports that financing constraints influence firm’s demand for insurance. Our results are robust when using other measures of financing constraints and measures of insurance demand.
Keywords: Financial Constraints, Risk Management, Insurance Demand, Credit Scores, Unlisted Firms
JEL Codes: D22, D25, G22, G32

avatar for Mu-Sheng Chang

Mu-Sheng Chang

California State University- Northridge


Emil Bustos

Stockholm School of Economics

Monday August 2, 2021 10:45am - 12:15pm EDT