Credit Constraints, Heterogeneous Firms and Loan Defaults
AbstractIn light of the recent financial and economic crisis the present paper analyzes the determinants of loan default. We employ a unique firm-level panel data of 700 bank loans given to small and medium sized enterprises in Slovakia between 2000 and 2005 to investigate three loan default hypothesis. Testing the Sector-Risk Hypothesis, we find that agro-food industry does not exhibit higher default rate than other sectors. Testing the Firm-Risk Hypothesis, we find that highly indebted firms are more likely to default on their loan than other firms. Testing the EU Subsidy Hypothesis we find that the newly introduced subsidy system, which is decoupled from production, provides a secure source of income and hence reduces the probability of loan default.
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Bibliographic InfoPaper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2011_17.
Date of creation: 17 Nov 2011
Date of revision:
Bank credit; loan default; credit constraints; heterogeneous firms.;
Other versions of this item:
- Jarko Fidrmuc & Pavel Ciaian & d'Artis Kancs & Jan Pokrivcak, 2013. "Credit Constraints, Heterogeneous Firms and Loan Defaults," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 53-68, May.
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-BAN-2011-12-13 (Banking)
- NEP-ENT-2011-12-13 (Entrepreneurship)
- NEP-RMG-2011-12-13 (Risk Management)
- NEP-TRA-2011-12-13 (Transition Economics)
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- Jan Fałkowski & Pavel Ciaian & d'Artis Kancs, 2009.
"Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies,"
2009-12, Faculty of Economic Sciences, University of Warsaw.
- Pavel Ciaian & Jan Falkowski & d'Artis Kancs, 2012. "Access to credit, factor allocation and farm productivity: Evidence from the CEE transition economies," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 22-47, March.
- Ciaian, Pavel & Falkowski, Jan & Kancs, d'Artis, 2010. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," 114th Seminar, April 15-16, 2010, Berlin, Germany 61347, European Association of Agricultural Economists.
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