OBJECTIVE The purpose of this thesis is to study the effect of credit access on small and medium-sized enterprises' financial performance. Based on the existing research of the topic, there is an evident lack of conclusive results. Through empirical analysis, the study aims to examine and measure whether a significant relationship can be found between SMEs' access to credit and different financial indicators that represent the viability of the business by measuring liquidity, profitability, and financial competency.
DATA AND METHODOLOGY The research is based on a dataset consisting of survey data and publicly available financial data collected on 376 Finnish small and medium-sized enterprises. The research was performed using Pearson’s correlation, independent samples t test, and multiple linear regression. The studied independent variable is SMEs' subjective view on credit access, coded as a dummy variable indicating whether or not the SMEs have problems accessing credit. The dependent variables are different financial indicators based on existing research measuring financial performance over different time periods.
EMPIRICAL FINDINGS The initial results indicate that credit access does have a significant relationship with the studied financial indicators. However, further regression analysis shows that the initially found significant relationship between credit access and financial performance almost completely disappears when accounting for the financial performance baseline. The regression results are further supported by a more in-depth review of the financial performance of the companies expressing credit problems. The results of the study suggest that credit access itself does not have a significant relationship with the overall financial performance of the company. Based on the results, it can be argued that problems with credit access seem to be an outcome of poor financial performance.
