Credit constraints and small business credit availability

• Autor(a) principal: Pinto, Sandra Isabel Saraiva
• Data de Publicação: 2012
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.6/3050
• topic: Pequenas e médias empresas - Assimetria de informação; Pequenas e médias empresas - Acesso crédito

This study investigates the effect of the ex ante private information versus ex post model in which collateral is used to overcome incentive conflicts between borrowers and lenders, and thus mitigating credit rationing. The study empirically examines differences in private and public information to test the two set of theories. Using a database of 38 639 SME credit approvals from a large Portuguese commercial bank between January 2007 to February 2012, the results show that less risky borrowers are more likely to accept an increase in collateral requirements for certain reduction in the interest rate. These results support the ex ante theory. The results also indicate that the ex post theory dominate for borrowers who had default on a loan in the past. Moreover, because one third of the loans have associated a mutual guarantee, the findings suggest that borrowers that default or are not able to provide additional guarantees are credit rationed. Furthermore, the results are robust when we control the amount of collateral pledge and the macroeconomic conditions. Therefore, in periods of economic contraction and declining in asset values lenders are more likely to require collateral.