Credit rationing or overlending? An exploration into financing imperfection

Jean Bonnet, Sylvie Cieply and Marcus Dejardin ()

Applied Economics, 2016, vol. 48, issue 57, 5563-5580

Abstract: Small and new firms are deemed to be unable to obtain sufficient bank loans. This idea finds a strong theoretical support in credit rationing theory. However, this is vigorously challenged by De Meza and Webb (1987, 2000) suggesting that firms can benefit from an excess of credit, i.e. overlending. Credit rationing or overlending? The contribution of this empirical article is twofold: to our knowledge, it is the first to make an attempt in measuring the relative importance of these two types of financing imperfection and to explore factors leading to one or the other. We exploit a rich panel data set on the access to bank credit for new French businesses during the mid-1990s. Our results show that credit rationing was not highly spread among French new firms. The story told by De Meza and Webb (1987) appears to be a much more realistic model. In addition, we identify factors, linked to the starter, the project or the industry, that are closely associated with credit rationing and/or overlending. Most factors enter into a consistent relation: when they are positively (negatively) associated with credit rationing, they are negatively (positively) associated with overlending.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2016.1181829 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Credit rationing or overlending? An exploration into financing imperfection (2016)
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:taf:applec:v:48:y:2016:i:57:p:5563-5580

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2016.1181829

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().