Public Credit Guarantees and SME Finance
AbstractDifficulties in finding appropriate financing weigh heavily on the ability to grow of Italy’s small enterprises, due to their narrow equity base and limited access to credit markets. The State Fund for guarantees to SMEs is one of the instruments used to overcome such difficulties. This essay provides the first evaluation of the impact of this Fund in terms of ability to increase the availability of credit, reduction of borrowing costs and financial sustainability. Extensive econometric tests have been carried out by comparing the performance of the SMEs that benefited from this guarantee with a control group made out of a sample of comparable firms. The findings confirm the presence of a causal relationship between the State guarantee and the higher debt leverage of guaranteed firms, as well as their lower debt cost. The guarantee instrument has proved to be an effective instrument, although it has had a limited economic impact because of its narrow capital base and selective approach.
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Bibliographic InfoPaper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 73.
Length: 55 pages
Date of creation: Dec 2006
Date of revision:
SME; State-fund guarantee; credit rationing; causal effect; difference-in-difference.;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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