Information Asymmetry in SME Credit Guarantee Schemes: Evidence from Japan

Kuniyoshi Saito and Daisuke Tsuruta

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In this paper, we investigate whether adverse selection and/or moral hazard can be detected in credit guarantee schemes for small and medium enterprises (SMEs). Using bank-level data, we analyzed whether the subrogation rate is positively associated with the ratio of guaranteed loans to total loans, and found that the data are consistent with an adverse selection and/or moral hazard hypothesis. Further analyses show that the relationship is stronger for 100% coverage than for 80% coverage, indicating that "20% self-payment" mitigates the problem, but is not enough to eliminate it.

Pages: 40 pages
Date: 2014-07
New Economics Papers: this item is included in nep-ban, nep-cta and nep-ent
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:14042

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