The Significance of Credit Rationing on Real Investment Activity – A Test for the Significance of Capital-Market Imperfection in Japan

Does bank credit matter to the real investment finance of firms? If so, to what kind of firms does it matter, and why? Despite the progress of research in this field, there is still little empirical consensus on these problems. This paper contributes to the understanding of capital-market imperfection in Japan by answering these questions. I introduce new methods to test the significance of credit rationing and show that bank credit is indeed a very important determinant of real investment activity of small firms. The availability of long-term loans has particularly significant effects on the investment opportunities of small firms, although large firms with capital of more than 1 billion yen are free from credit rationing. JEL Classification Numbers: C51, E44, G21.     

Causal Effect of Credit Guarantees for Small- and Medium-Sized Enterprises: Evidence from Italy

We evaluate the effectiveness of a partial credit guarantee program, implemented in a large Italian region, that aimed to improve the access to credit of small and medium enterprises. Using unique microdata from a broad set of firms, we show that the policy increased the long-term loans for beneficiary firms, while the total volume of bank loans was unaffected. Furthermore, targeted firms benefited from a substantial decrease in interest rates. However, there is some evidence that firms are more likely to default as a consequence of the treatment. Conversely, the results do not point to any significant effect on investments.     

Investment and Finance in de novo private firms: Empirical Results from the Czech Republic, Hungary and Poland

In 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 constraints 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 new private firms. Credit markets do exist for de novo private firms in the three Central European transition economies studied, and they provide quite a large amount of financing from an 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.     

Post Keynesian endogenous money theory: A theoretical and empirical investigation of the credit demand schedule

The article investigates the relationship between interest rates and loan amounts provided by commercial banks from both a theoretical and an empirical perspective. Theoretically, some scholars belonging to the post Keynesian endogenous money tradition advocate that a decrease (increase) in interest rates leads to a positive (negative) effect on the amount of loans demanded by households and firms. On the other hand, some heterodox economists maintain that interest rates do not stimulate firms’ credit demand but that a certain degree of influence is allowed for loans provided to households. By applying a vector autoregression (VAR) and vector error-correction model (VECM) methodology to European Central Bank and Organisation for Economic Co-operation and Development data for the eurozone, this article proposes an empirical validation of such theoretical premises by analysing the relationship between the different types of credit provided by commercial banks and the corresponding interest rates. The main results show a negative relationship between the interest rates and the credit provided for the purchase of houses. Conversely, no significant relationship is found between loans granted to enterprises and loans for the purchase of consumption goods and the corresponding interest rates.     

Does trade credit redistribution thwart monetary policy? Evidence from Italy

Italy is an ideal candidate for testing the credit view of the transmission mechanism because of a bank-centred financial structure, a sizeable trade debt, and an economy titled towards small firms. An empirical analysis of trade credit and debt on averaged panel data shows that small firms act as financially constrained and cycle-sensitive, whereas large ones aim at smoothing sales, adopt an integrated management of inventories and receivables and have a higher trade debt to purchases elasticity. On balance, the net trade credit channel does not, as implied by the credit view, shield small firms from a monetary squeeze.     

Public subsidies and new ventures’ use of bank loans

Access to financial resources is crucial for young firms to strive. To foster innovation and growth in these firms, governments address financing constraints by initiating public support programs. For such financial support to be effective, it is, however, important that firms are able to augment publicly provided resources with additional means. This study examines the relationship between new ventures’ subsidy receipt and long-term bank loans. Studying new ventures founded between 2005 and 2009 in Germany, we test whether the subsidy itself facilitates use to bank financing. Applying econometric techniques that account for the endogenous nature of a subsidy receipt, we find that subsidized young firms are more likely to use bank loans and to have obtained a larger share of their financing mix from banks. We further show that this effect is stronger in highly information-opaque sectors. These results suggest that the effect may be attributed to an information value carried by the grant that is relevant to banks’ loan assessment procedures, especially when new venture value is difficult to judge.     

信用风险、信息与协调

金融机构的短期债券同时被大小两种债权人持有。信用风险由流动性不足风险和破产风险组成。我们建立了一个同时包含大小两种债权人的模型来研究大的债权人、短期债券比例与市场流动性如何影响信用风险。模型的结果显示:(1)提高大的债权人的信息准确度可以让小的债权人更愿意继续借贷,因此降低了流动性不足风险;(2)短期债券比例的提高会增加流动性不足风险,也就增加了总的信用风险;(3)市场流动性越强,流动性不足风险就越小。     

Why the money multiplier has remained persistently so low in the post-crisis United States?

The money multiplier collapsed in the USA in the wake of the Lehman crisis, and since then it remained at particularly low levels. The main reason for this collapse is to be found in the significant increase in banks’ excess reserves and the modest increase in deposits. The weak growth of deposits resulted from a contained growth of loans. Most scholars attribute the latter to the low propensity of banks to grant credit. Using quarterly data for the period 1991–2017 we estimate a demand for loans by firms and households. We show that the modest increase in deposits and the persistence of low levels of the US money multiplier has been due to the weak demand for loans by the private sector.     

Credit constraints in Italian industrial districts

Italy is characterized by strong differences both in the productive and in the financial structure. Small and medium firms tend to concentrate in the so called ‘Marshallian industrial district’, whose productive system has been thoroughly studied but whose financial features are partially overlooked. This paper aims at investigating how the location of a firm in an industrial district affects its ability to resort to external finance, mostly bank loans. The econometric analysis on a panel of 1700 firms over the 1989–1995 period shows that firms located inside industrial districts have an advantage in terms of financial relations with the banking system: both the cost of credit and the probability to face financial constraints are lower. Nevertheless, the cyclical pattern of this advantage is not in favour of district firms: following the tightening of monetary policy, increases in interest rates on bank loans are proportionally higher for firms inside the district; furthermore, also the advantage consisting in an easier access to credit market disappears after the 1992–1993 recession.     

Job creation through public start-up assistance?

This study examines the impact of German public start-up assistance programmes administered by the Deutsche Ausgleichsbank (DtA) on the performance of young firms. The empirical analysis is based on firms from the ZEW Entrepreneurship Study that either received start-up loans in one or more DtA schemes or did not receive any funding from the DtA at all. The paper applies a non-parametric matching approach often applied by labour market economists. The interesting success measure is the average annual employment growth rate over a six year period and the resulting causal effect is the difference of this measure between the group of subsidized firms and the selected control group firms that did not receive any DtA start-up loans. The empirical analysis shows that DtA start-up loans significantly improve the average employment growth rate.     

Bank lending procyclicality and credit quality during financial crises

This paper analyses macroeconomic and financial determinants of bad loans applying a SVAR approach to investigate whether excessive loans granted during expansionary phases can explain the more than proportional increase in non-performing loans during contractionary periods. The results indicate that the effects of a permanent shock to bad loans on the excess of credit are significant and persistent for bad loans to firms, but not for bad loans to households or in the case of Cooperative Credit Banks, who adopt more efficient lending policies.     

Will euro area house prices sharply decrease?

The long-term euro area house price equilibrium and its short-term dynamics are estimated by means of a panel error correction model. The estimates show that the short-term dynamics are essentially driven by the autoregressive term (persistence), disposable income and mortgage loans, whereas interest rates have little effect. The long-term house price equilibrium is mainly driven on the demand side by disposable income, interest rates, and mortgage loans, whereas costs (mostly land) drive the equilibrium on the supply side. The unprecedented long-lasting boom in house prices from 1997 to 2007 is thus essentially explained by a favourable macroeconomic development caused by the EMU effect and a glut of global savings. The bust phase of euro area house prices began in 2007, and the current house price might return to its equilibrium level in 2014. According to the most realistic scenario, euro area house prices will experience a smooth and soft landing in 2016 and then begin an increasing phase that will be pulled upwards by a higher equilibrium price. However, a deflationary scenario cannot be excluded if the current credit squeeze is not solved, particularly in the peripheral euro area member states.     

Bank versus nonbank financial institution lending behaviour: indictors of firm size,risk or ownership?

Using 1251 matched commercial loan deal terms of listed companies over the period 2003–2014, we examine the heterogeneity of lending behaviours of bank and nonbank financial institutions. The results show that large firms have a higher likelihood of getting loans from nonbank financial institutions. Compared to banks, nonbank financial institutions are more likely to provide credit help to high operation risk firms. State-owned listed firms have a higher probability to get finance from nonbank financial institutions than private firms, which highlights the situation that private firms are in a weak position to get credit help from China’s financial system. Moreover, the process of increasing the banks’ noninterest income ratio tends to drives firms to borrow from nonbank financial institutions.     

积极的小微企业信贷政策研究

小微企业占我国企业群体的绝大部分,是社会财富的主要创造者,也是吸纳就业的主渠道,在我国国民经济中占有重要地位,但小微企业贷款难问题突出.小微企业贷款难,既有企业自身和商业银行方面的原因,更有存款准备金率政策对小银行存在歧视、资本占用系数的规定缺乏支持小微企业贷款的充分安排、贷款指标没有充分向小微企业倾斜等信贷政策方面的原因.因此,应牢固树立“小微企业贷款≠高风险贷款”的理念,将主营小微企业贷款的小银行当作发展小微企业的战略重点,降低小银行的存款准备金率,降低小企业贷款的风险权重和资本匹配系数,信贷指标分配向小微企业贷款倾斜,实施积极宽松的小微企业信贷政策.     

Credit rationing or overlending? An exploration into financing imperfection

Small and new firms are deemed to be unable to obtain sufficient bank loans. This idea finds a strong theoretical support in credit rationing theory. However, this is vigorously challenged by De Meza and Webb (1987, 2000) suggesting that firms can benefit from an excess of credit, i.e. overlending. Credit rationing or overlending? The contribution of this empirical article is twofold: to our knowledge, it is the first to make an attempt in measuring the relative importance of these two types of financing imperfection and to explore factors leading to one or the other. We exploit a rich panel data set on the access to bank 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 told by De Meza and Webb (1987) appears to be a much more realistic model. In addition, we identify factors, linked to the starter, the project or the industry, that are closely associated with credit rationing and/or overlending. Most factors enter into a consistent relation: when they are positively (negatively) associated with credit rationing, they are negatively (positively) associated with overlending.     

信贷量经济效应的期限结构研究

银行信贷和经济波动的关系一直是理论和实务界关注的焦点,过去国内的研究大多仅从信贷总量层面入手而忽视了结构效应,这不利于厘清信贷在经济中的作用机理。在将贷款按期限划分为短期贷款和中长期贷款后,本文通过应用一个小型DSGE模型,发现短期贷款对经济增长虽有短期的促进作用,但却形成通货膨胀压力;而中长期贷款对经济增长有长期的促进作用,同时对通货膨胀有一定的抑制作用。以我国1998-2010年的宏观数据为样本进行的FAVAR检验支持了上述观点。该结论一方面意味着信贷政策及其监管应加强对信贷期限结构的关注,另一方面结合我国近年来中长期贷款比重大幅上升的客观事实,也从一个新的视角解释了货币信贷加速扩张的同时,价格水平却较为稳定的"中国货币之谜"。     

Bank loans vs. trade credit

Using a World Bank dataset of Chinese firms, we investigate the relative importance of bank loans and trade credit in promoting firm performance. To deal with possible endogeneity issues, we employ distinct and separable instrumental variables for bank loans and trade credit. We find that access to bank loans is central to improving firm performance and growth, while the availability of trade credit is much less important. Our results suggest that trade credit cannot effectively substitute for bank loans. Overall, our findings suggest the need for further development of China's formal financial institutions, which would enable the non‐state sector to grow much faster than it has grown in recent decades.     

信贷融资约束对员工收入的影响-来自我国企业微观层面的经验证据

文章运用世行《中国投资环境调查》(2005年)中对2004年我国12400家企业的调查数据,实证分析了我国制造业企业信贷融资约束对员工收入的影响.研究结果表明,我国企业所存在的信贷融资约束总体而言会显著地降低员工收入水平,即使是在未获得贷款企业内部,该负向作用仍然显著存在.稳健性检验表明,融资约束对员工收入的负影响这一结论并不随融资约束度量指标、估计模型设定以及融资约束的内生性问题而发生改变.进一步研究表明,短期内企业信贷融资约束对员工收入的显著负向作用由前者对企业劳动生产率的显著抑制作用直接导致,并且该负向作用在非正规雇佣比重高的企业中更为明显,因为非正规雇佣比重高的企业所存在的信贷融资约束还会显著降低企业的劳动力需求,从而使员工收入进一步减少.本文的研究成果为从完善金融体系、提高金融发展水平方面改善劳动力收入提供了经验支持.     

A QUEST FOR UNFETTERED CREDIT: HOW MONETARY POLICY DRIVES CREDIT RISK TRANSFER OF STRUCTURED FINANCE PRODUCTS

This study examines the effects of monetary policy contractions on bank loans to households and firms and instruments in three different credit risk transfer (CRT) capital markets over two separate time periods (1995–2006 and 2007–2015). The findings show that in both periods, banks decrease business lending but increase lending to consumers through a combination of mortgage, auto, credit card, and student loans from more liquidity produced by consumer‐related CRT activity. Additional results reveal relative CRT movements toward securitized mortgages from bank mortgage debt over both periods and toward securitized and insured business loans from bank business debt in the latter period, which suggest vulnerabilities among interconnected credit markets. (JEL E44, E51, G21, G23)     

Credit constraints and productivity of SMEs: Evidence from Canada

To what extent firms are constrained by external credit is usually unobserved in commonly used firm-level data. We use a survey of financing among Canadian small and medium-sized enterprises to measure the likelihood of a firm being constrained by credit. We find that firm size, current debt-to-asset ratio and cash flow are robust indicators of being financially constrained, while long-term debt to asset ratio is not a significant indicator of credit constraints. We then estimate the firm-level total factor productivity, taking into account the measured credit constraints. Omitting credit constraints leads to an upward bias of productivity estimates, by 4 percent. In addition, we find no strong evidence that suggests credit constraints lead to slower productivity growth. Finally, we confirm that both investment and employment growth are negatively affected by the measured credit constraints.