Investment and Finance in De Novo Private Firms: Empiracal Results from the Czech Republic, Hungary and Poland
AbstractIn this paper we use a survey of 281 Czech, Hungarian and Polish newly established small private firms in order to shed some light on the constrains these firms face in the credit market. The results of our survey show that imperfections in capital markets in Central European economies do not seem to actually inhibit the growth of Central European transition economies studied, but they provide quite a large amount of financing and do so from a remarkably early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms in the three Central European transition economies studied, but they provide quite a large amount of financing and do so from a remarkably early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms are concerned: loss-making de novo firms have a lower probability of getting credit than profitable ones. Banks protect themselves against the risk of a deteriorating pool of borrowers by requiring collateral for their loans. We do not find convincing evidence concerning the existence of adverse selection. Loss-making firms are not ready to pay higher interest rates than profitable firms and are not more likely to ask for credit than profitable firms.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 236.
Date of creation: 01 Apr 1999
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transition; credit marker; investment; financial constraints; start-ups;
Other versions of this item:
- Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 2000. "Investment and Finance in "de novo" private firms: Empirical Results from the Czech Republic, Hungary and Poland," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 8(1), pages 101-116, March.
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
This paper has been announced in the following NEP Reports:
- NEP-CFN-2001-12-19 (Corporate Finance)
- NEP-EEC-2001-12-19 (European Economics)
- NEP-ENT-2001-12-04 (Entrepreneurship)
- NEP-MFD-2001-12-19 (Microfinance)
- NEP-TRA-2001-12-19 (Transition Economics)
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