IDEAS home Printed from https://ideas.repec.org/p/bdi/opques/qef_127_12.html
   My bibliography  Save this paper

Financial fragility and growth prospects: credit rationing during the crisis

Author

Listed:
  • Giorgio Albareto

    () (Bank of Italy)

  • Paolo Finaldi Russo

    () (Bank of Italy)

Abstract

This paper analyzes firms� difficulties in accessing credit before and during the crisis, by focusing on two of their characteristics: financial fragility and growth prospects. Our econometric analysis indicates that fragile financial conditions were associated with a much higher than average probability of rationing, both before and during the crisis. High rates of growth in sales and investments, in value added per employee and in the propensity to export � indicators presumably linked to growth prospects � favoured access to credit in the period leading up to the financial crisis; during the crisis, instead, credit rationing was more widespread and less related to firms� potential growth. Lending relationships facilitated access to the credit market, especially for firms with better growth prospects; this result is consistent with the hypothesis that the banks which are more involved in firms� financing have better information and stronger incentives to use it.

Suggested Citation

  • Giorgio Albareto & Paolo Finaldi Russo, 2012. "Financial fragility and growth prospects: credit rationing during the crisis," Questioni di Economia e Finanza (Occasional Papers) 127, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_127_12
    as

    Download full text from publisher

    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2012-0127/QEF_127.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Guiso, Luigi, 2003. "Small business finance in Italy," EIB Papers 10/2003, European Investment Bank, Economics Department.
    2. Stefania De Mitri & Giorgio Gobbi & Enrico Sette, 2010. "Relationship lending in a financial turmoil," Temi di discussione (Economic working papers) 772, Bank of Italy, Economic Research and International Relations Area.
    3. Guiso, Luigi, 1998. "High-tech firms and credit rationing," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 39-59, March.
    4. Eugenio Gaiotti, 2011. "Credit availability and investment in Italy: lessons from the "Great Recession"," Temi di discussione (Economic working papers) 793, Bank of Italy, Economic Research and International Relations Area.
    5. Del Giovane, Paolo & Eramo, Ginette & Nobili, Andrea, 2011. "Disentangling demand and supply in credit developments: A survey-based analysis for Italy," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2719-2732, October.
    6. Ferrando, Annalisa & Griesshaber, Nicolas, 2011. "Financing obstacles among euro area firms: Who suffers the most?," Working Paper Series 1293, European Central Bank.
    7. Antonio Accetturo & Anna Giunta & Salvatore Rossi, 2011. "The Italian Firms between Crisis and the new Globalization," L'industria, Società editrice il Mulino, issue 1, pages 145-164.
    8. Valerio Vacca, 2011. "An unexpected crisis? Looking at pricing effectiveness of different banks," Temi di discussione (Economic working papers) 814, Bank of Italy, Economic Research and International Relations Area.
    9. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August.
    10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. International Monetary Fund, 2013. "Italy; Technical Note on the Financial Situation of Italian Households and Non-Financial Corporations and Risks to the Banking System," IMF Staff Country Reports 13/348, International Monetary Fund.
    2. Guido de Blasio & Stefania De Mitri & Alessio D'Ignazio & Paolo Finaldi Russo & Lavina Stoppani, 2017. "Public guarantees on loans to SMEs: an RDD evaluation," Temi di discussione (Economic working papers) 1111, Bank of Italy, Economic Research and International Relations Area.
    3. Claire Giordano & Marco Marinucci & Andrea Silvestrini, 2016. "Investment and investment financing in Italy: some evidence at the macro level," Questioni di Economia e Finanza (Occasional Papers) 307, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    credit rationing; relationship lending; financial fragility; growth prospects;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:opques:qef_127_12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/bdigvit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.