The Valuation of Government Loan Guarantees: a Theoretical and Empirical Perspective

Samuel Mensah
Additional contact information
Samuel Mensah: University of Michigan-Flint

Public Finance Review, 1996, vol. 24, issue 2, 263-281

Abstract: This study provides a model for the valuation of the benefits associated with government guarantee programs. The model generates the social value of a government loan guarantee under disequilibrium conditions that justify public investment as a second best decision rule. The social value of a loan is obtained by conditioning the benefits on the survival of the borrowing firm. An estimated hazard function captures the annual rate of benefit attrition resulting from the failure of borrowing firms. Benefit-cost indexes are generated by business class, thus providing ex ante asset allocation guidelines. Application of the model to a portfolio of loan guarantees administered by the Ontario Development Corporation indicates a positive social value under the assumed disequilibrium conditions.

Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/109114219602400208 (text/html)

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:sae:pubfin:v:24:y:1996:i:2:p:263-281

DOI: 10.1177/109114219602400208

Access Statistics for this article

More articles in Public Finance Review
Bibliographic data for series maintained by SAGE Publications ().