Credit rationing or overlending:Who is right ?
AbstractThere is a widespread belief in both academic literature and policy circles that small firms are unable to obtain sufficient banking loans.This idea finds a strong theoretical support in credit rationing theory, as initiated by Stiglitz and Weiss (1981). However, this is vigorously challenged by De Meza and Webb (1987, 2000) suggesting contrastingly that firms can benefit from an excess of credit. This empirical article is the first to test these two theories using data on the access to credit for new French businesses during the mid 1990s. Our results show that credit rationing was not highly spread among French new firms. The story described by De Meza and Webb (1987) appears to be a much more realistic model. Finally, we identify factors closely associated with credit rationing and overlending.
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Bibliographic InfoPaper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201309.
Date of creation: Mar 2013
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Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France
Find related papers by JEL classification:
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-BAN-2013-04-13 (Banking)
- NEP-ENT-2013-04-13 (Entrepreneurship)
- NEP-SBM-2013-04-13 (Small Business Management)
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