What role can mutual guarantee consortia play for financing innovation? A firm-level study for Italy

Elisa Ughetto and Andrea Vezzulli ()

International Journal of Banking, Accounting and Finance, 2011, vol. 3, issue 4, 294-319

Abstract: It is widely acknowledged that firms performing R&D investments are very likely to undergo financial constraints due to their specific characteristics, which make external debt an imperfect substitute for internal finance, especially for small sized enterprises (Carpenter and Petersen, 2002; Hall, 2002). This situation calls into question the role that mutual guarantee consortia (MGC) might have in mitigating the effect of financial constraints on the innovative activities performed by small and medium enterprises (SMEs). In this paper, we explore how effectively this role is played by exploiting a large dataset of guarantee-backed loans provided by Eurofidi (an Italian mutual guarantee consortium), including both financial and non-financial information on applicant firms. We find that, when the destination of loans is considered, applications demanded to sustain R&D and innovation activities have a lower probability of being accepted, but they also have a lower probability of turning into bad loans (conditional on loan's acceptance), thus highlighting the potential absence of a minimising default risk behaviour by the granting institution (Boyes et al., 1989) with respect to the observed characteristics of the applicants.

Keywords: default prediction; research and development; R&D investments; small and medium-sized enterprises; SMEs; mutual guarantee consortia; MGC; Italy; innovation finance; guarantee-backed loans; default risk behaviour. (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.inderscience.com/link.php?id=43704 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:ids:injbaf:v:3:y:2011:i:4:p:294-319

Access Statistics for this article

More articles in International Journal of Banking, Accounting and Finance from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().