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The Causal Effect of Credit Guarantees for SMEs: Evidence from Italy

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  • Alessio D'Ignazio
  • Carlo Menon

Abstract

We evaluate the effectiveness of a partial credit guarantee program implemented in a large Italian region using unique microdata from a broad set of firms. Our results show that the policy was effective to the extent that it resulted in an improved financial condition for the beneficiary firms. While the total amount of bank debt was unaffected, firms showed a significant increase in the long-term component. Furthermore, targeted firms benefited from a substantial decrease in interest rates. On the other hand, there is some evidence that the probability of default increases as a consequence of the treatment, although the effect is only marginally significant. There are, instead, no effects on the real outcomes.

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Bibliographic Info

Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0123.

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Date of creation: Dec 2012
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Handle: RePEc:cep:sercdp:0123

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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Keywords: Financial subsidies; credit constraints; banking;

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  1. Barone, Guglielmo & Felici, Roberto & Pagnini, Marcello, 2011. "Switching costs in local credit markets," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 694-704.
  2. Salvatore Zecchini & Marco Ventura, 2009. "The impact of public guarantees on credit to SMEs," Small Business Economics, Springer, vol. 32(2), pages 191-206, February.
  3. C. Lelarge & D. Sraer & D. Thesmar, 2008. "Entrepreurship and Credit Constraints - Evidence from a French Loan Guarantee Program," Documents de Travail de la DESE - Working Papers of the DESE g2008-07, Institut National de la Statistique et des Etudes Economiques, DESE.
  4. Columba, Francesco & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2010. "Mutual guarantee institutions and small business finance," Journal of Financial Stability, Elsevier, vol. 6(1), pages 45-54, April.
  5. Bronzini, Raffaello & de Blasio, Guido, 2006. "Evaluating the impact of investment incentives: The case of Italy's Law 488/1992," Journal of Urban Economics, Elsevier, vol. 60(2), pages 327-349, September.
  6. José Miguel Benavente & Alexander Galetovic & Ricardo Sanhueza, 2006. "Fogape: an economic analysis," Working Papers wp222, University of Chile, Department of Economics.
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