The Effectiveness of Public Credit Guarantees in the Japanese Loan Market

Uesugi Iichiro, Sakai Koji and Yamashiro Guy M.

No 400, PIE/CIS Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: This paper examines the effectiveness of public credit guarantee programs in not only increasing the availability of loans to small and medium enterprises (SMEs), but in also improving the ex-post performance of borrowing firms. Using a unique panel data set, we identify the effects of a massive credit guarantee program implemented by the Japanese government from 1998-2001. While we do find that the availability of loans increased for program participants, when loans were provided by undercapitalized banks the increased liquidity persisted for only a few years. Further, the ex-post performance of program participants, with the exception of firms with sizable net worth, deteriorated relative to their non-participating counterparts.

Keywords: Credit crunch; Small and Medium Enterprises; Loan guarantees; Matching estimation (search for similar items in EconPapers)
JEL-codes: G28 G38 H81 (search for similar items in EconPapers)
Date: 2008-09
Note: 3 September 2008, An earlier version of this paper circulated as "Effectiveness of Credit Guarantees in the Japanese Loan Market," 2006 RIETI Discussion Paper Series 06-E-04.

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Persistent link: http://EconPapers.repec.org/RePEc:hit:piecis:400

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