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Live large or die young: subsidized loans and firm survival in Brazil

Philipp Ehrl

Empirical Economics, 2021, vol. 61, issue 6, No 18, 3479-3503

Abstract: Abstract This paper assesses whether the receipt and financing conditions of subsidized loans from the Brazilian Development Bank (BNDES) affect the survival of firms between 2003 and 2014. Firms that ever obtain one of those subsidized loans from the BNDES have more employees, affiliates, experience, among other characteristics that are positively related to survival in the market. To address the firms’ nonrandom selection into BNDES loans, I use a novel combination of duration analysis and selection model. The data show that without this correction, the exit risk reduction is overestimated by a factor of three. Notwithstanding, receiving a BNDES loan and experiencing lower interest rates, significantly reduce the exit risk. The results also indicate that the expansion of the BNDES’ credit supply overly attracted low-quality firms into the market and into BNDES loans.

Keywords: BNDES; Firm survival; Development banks; Subsidized loans; Selection bias (search for similar items in EconPapers)
JEL-codes: C41 D25 G38 L25 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00181-020-02003-1

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