Firm-level impact of public credit guarantees

Ufuk Akcigit, Ünal Seven, İbrahim Yarba and Fatih Yilmaz

European Economic Review, 2024, vol. 170, issue C

Abstract: This paper studies the firm-level short-term impact of one of the world’s largest credit guarantee programs recently implemented in Türkiye. Using a combination of firm-level administrative databases of the tax registry, credit registry, and the credit guarantee fund (CGF) registry, we analyze the characteristics of the CGF-supported firms and the program’s impact on their employment, sales, and credit default probability. Our findings indicate that, on average, the CGF program had a positive effect on the short-term performance of the treated firms. Specifically, CGF-supported firms preserved 17 percent more employment and achieved 70 percent higher sales, while reducing their credit default probability by 0.6 percentage points compared to their matched control group. Evaluating our estimation results at variable averages shows that every 1 million TL credit generated via the CGF program preserved 2.7 extra employment and stimulated about 3 million TL in sales. However, the program did not lead to increased productivity-enhancing investments, such as R&D. Additionally, we observe an overall increase in firm indebtedness, which may adversely affect firms’ long-term financial health. Furthermore, our analysis reveals that the program’s impact varies across firm sizes and sectors, with medium-sized firms and labor-intensive sectors experiencing the most significant benefits. Using this heterogeneity, we perform counter-factual policy exercises indicating that redesigning the program with such priorities can bring substantial efficiency gains.

Keywords: Credit guarantee schemes; SME lending; Impact analysis (search for similar items in EconPapers)
JEL-codes: G21 G3 L25 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292124001909
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Firm-Level Impact of Public Credit Guarantees (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:170:y:2024:i:c:s0014292124001909

DOI: 10.1016/j.euroecorev.2024.104861

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().