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Firms in Green Public Procurement: Financial Strength Indicators’ Impact on Contract Awards and Its Repercussion on Financial Strength

Firms in Green Public Procurement: Financial Strength Indicators’ Impact on Contract Awards and Its Repercussion on Financial Strength
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Year:    2021

Author:    Baum, Christopher F., Kordestani, Arash, Schäfer, Dorothea, Stephan, Andreas

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 90 (2021), Iss. 4 : pp. 71–92

Abstract

We examine whether the financial strength of companies, in particular, small and medium-sized enterprises (SMEs) is causally linked to the award of a public procurement contract (PP), especially in the environmentally friendly green area (GPP). For this purpose, we build a combined procurement company data set from the Tenders Electronic Daily (TED) and the SME database AMADEUS, which includes ten European countries. First, we apply probit models to investigate whether the probability of winning the public tender depends on the company’s financial strength. We then use the flexpanel DiD approach to investigate the question of whether the award has an impact on the future financial strength of the successful company. On the one hand, we find that a lower equity ratio and a higher short-term debt ratio increase the probability of being successful in a public tender. On the other hand, a success means that the companies can continue to work after the award with a lower equity ratio than comparable companies without an award, regardless of whether the company was successful in a traditional or a green public tender. We conclude from this that the success in a PP is a substitute for a firm’s own financial strength and thus facilitates access to external financing.

Journal Article Details

Publisher Name:    Global Science Press

Language:    English

DOI:    https://doi.org/10.3790/vjh.90.4.71

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 90 (2021), Iss. 4 : pp. 71–92

Published online:    2021-10

AMS Subject Headings:    Duncker & Humblot, Duncker & Humblot

Copyright:    COPYRIGHT: © Global Science Press

Pages:    22

Keywords:    G30 Q56 Q01 O16 Sustainable Finance Public Procurement Green Public Procurement Small and Medium-sized Companies Innovation Financial constraints

Author Details

Baum, Christopher F.

Kordestani, Arash

Schäfer, Dorothea

Stephan, Andreas

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Section Title Page Action Price
Christopher F. Baum, Arash Kordestani, Dorothea Schäfer and Andreas Stephan:\nFirms in Green Public Procurement: Financial Strength Indicators’ Impact on Contract Awards and Its Repercussion on Financial Strength, 71
Introduction 72
Previous Research 73
Data 75
Empirical Approach 78
H1: The likelihood of winning a public procurement tender depends on the firm’s financial strength. 79
H2: Winning a tender has an impact on the firm’s financial strength in the years after the contract award. 71
Does Financial Strength Affect the Likelihood of Winning a Tender? 71
Does Winning a Public Procurement Tender Promote a Firm’s Financial Strength? 71
Conclusions 71
References 71
Appendix 1: Tender Types 72