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Entrepreurship and Credit Constraints - Evidence from a French Loan Guarantee Program

Author

Listed:
  • C. LELARGE

    (Crest-OECD)

  • D. SRAER

    (University of California, Berkeley)

  • D. THESMAR

    (HEC Paris and CEPR)

Abstract

We use information on a French loan guarantee program in order to assess the consequences of credit constraints for new ventures. Loan Guarantee Programs, as implemented in France, are an effective instrument to help young firms grow faster, both in terms of employment and capital. These effects are quite persistent, since they are still significant four years after obtaining the guarantee. Loan guarantees also allow firms to pay cheaper interest rate, but a potential drawback of this policy consists in guaranteed ventures adopting riskier strategies and thus filing more often for bankruptcy. Last, we find no effect, at the industry level, on creation rates.

Suggested Citation

  • C. Lelarge & D. Sraer & D. Thesmar, 2008. "Entrepreurship and Credit Constraints - Evidence from a French Loan Guarantee Program," Documents de Travail de l'Insee - INSEE Working Papers g2008-07, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2008-07
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    File Function: Document de travail de la DESE numéro G2008/07
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    Keywords

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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