Impact of credit guarantee on firm performance: Evidence from China’s SMEs

Jian Yu, Fanjia Peng, Xunpeng Shi and Longjian Yang

Economic Analysis and Policy, 2022, vol. 75, issue C, 624-636

Abstract: Using detailed monthly survey data on small and medium-sized enterprises (SMEs) in China, this study uses the total factor productivity (TFP) of SMEs as a proxy variable to investigate credit guarantees’ impacts on the performance of guarantors and guaranteed SMEs. The results reveal that obtaining a credit guarantee can increase an SME’s probability of obtaining bank loans, the loan amount received from banks, R&D expenditures, fixed asset investments, and TFP by 2%, 17.4%, 7.6%, 6.1%, and 5.2%, respectively. Credit guarantees robustly improve the guaranteed SME’s TFP through its R&D expenditures and fixed asset investments. We also found that credit guarantees have a spillover effect among different SMEs. Another critical finding is that providing credit guarantees to other SMEs will not harm the guarantor’s TFP, which is a second alternative to a mutually beneficial situation. These findings suggest that policymakers should focus on credit guarantees’ mitigating effect on financing constraints, which could increase SMEs’ TFP. Hence, policymakers must improve the system design within the credit guarantee market and accelerate the innovation of credit guarantee products in China to promote the high-quality development of SMEs.

Keywords: Credit guarantee; Total factor productivity; R&D expenditure; Small- and medium-sized enterprises (search for similar items in EconPapers)
JEL-codes: C23 D24 E51 H81 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:75:y:2022:i:c:p:624-636

DOI: 10.1016/j.eap.2022.06.017

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