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It Takes Two to Tango

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  • Rudolf Sivak
  • Anetta Caplanova
  • John Hudson

Abstract

The paper studies the firm's decision to apply for credit and the acceptance/rejection of a credit application. The results suggest that low access to credit of small and young firms, certainly in Central and Eastern Europe (CEE), is mainly due to low application rates. However, there is evidence to suggest that firms may be anticipating the bank's decision on a loan application by not applying for credit. Using the Heckman methodology suggests that marginal applications are more likely to be rejected. There are significant country and regional differences in applications, with the latter also evident in the rejection decision. There is no evidence that rural firms have significantly lower application or acceptance rates, given their other characteristics, or that foreign firms crowd domestic ones out of the market for credit. Finally, the credit process differs between CEE and other transition countries in Eurasia.

Suggested Citation

  • Rudolf Sivak & Anetta Caplanova & John Hudson, 2013. "It Takes Two to Tango," Eastern European Economics, Taylor & Francis Journals, vol. 51(2), pages 39-57, March.
    • Handle: RePEc:mes:eaeuec:v:51:y:2013:i:2:p:39-57
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    Cited by:

    1. Lubomira Gertler & Kristina Janovicova-Bognarova & Lukas Majer, 2020. "Explaining Corporate Credit Default Rates with Sector Level Detail," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(2), pages 96-120, August.

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