Credit Constraints, Heterogeneous Firms and Loan Defaults

Jarko Fidrmuc, Pavel Ciaian, d'Artis Kancs and Jan Pokrivcak

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: In light of the recent financial and economic crisis the present paper analyzes the determinants of loan default. We employ a unique firm-level panel data of 700 bank loans given to small and medium sized enterprises in Slovakia between 2000 and 2005 to investigate three loan default hypothesis. Testing the Sector-Risk Hypothesis, we find that agro-food industry does not exhibit higher default rate than other sectors. Testing the Firm-Risk Hypothesis, we find that highly indebted firms are more likely to default on their loan than other firms. Testing the EU Subsidy Hypothesis we find that the newly introduced subsidy system, which is decoupled from production, provides a secure source of income and hence reduces the probability of loan default.

Keywords: Bank credit; loan default; credit constraints; heterogeneous firms. (search for similar items in EconPapers)
JEL-codes: C25 G21 G33 Q14 (search for similar items in EconPapers)
Date: 2011-11-17
New Economics Papers: this item is included in nep-ban, nep-ent, nep-rmg and nep-tra
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Credit Constraints, Heterogeneous Firms and Loan Defaults (2013)
Working Paper: Credit Constraints, Heterogeneous Firms and Loan Defaults (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2011_17

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