Are Lending Relationships Beneficial or Harmful for Public Credit Guarantees? Evidence from Japan's Emergency Credit Guarantee Program
Arito Ono,
Iichiro Uesugi and
Yukihiro Yasuda
Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)
Abstract:
This paper examines the effectiveness of Japan's Emergency Credit Guarantee (ECG) program set up during the financial turmoil following the failure of Lehman Brothers, in increasing credit availability and improving the ex-post performance of small businesses. In particular, using a unique firm-bank matched dataset, the paper examines whether lending relationships enhanced or dampened the effects of the ECG program. It is found that the ECG program significantly improved credit availability for firms using the program. However, when it is a relationship lender (main bank) that extends an ECG loan, the increased availability is partially, if not completely, offset by a decrease in non-ECG loans by the same bank. Further, propensity score matching estimations show that the ex-post performance of firms that received ECG loans from the main bank deteriorates more than that of firms that received non-ECG loans. We do not find such loan "substitution" or performance "deterioration" effects when a non-main bank extends ECG loans. Our findings suggest that close firm-bank relationships may have perverse effects on the efficacy of public credit guarantees.
Pages: 39 pages
Date: 2011-03
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/11e035.pdf (application/pdf)
Related works:
Journal Article: Are lending relationships beneficial or harmful for public credit guarantees? Evidence from Japan's Emergency Credit Guarantee Program (2013) 
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:eti:dpaper:11035
Access Statistics for this paper
More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().