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Credit rationing or overlending? An exploration into financing imperfection

Jean Bonnet (), Sylvie Cieply () and Marcus Dejardin ()
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Sylvie Cieply: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: Small and new firms are deemed to be unable to obtain sufficient banking loans. This idea finds a strong theoretical support in credit rationing theory, as initiated by Stiglitz and Weiss (1981). 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 dataset on the access to banking 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 described 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.

Keywords: Asymmetric information; Overlending; Imperfect information; Credit rationing; New business (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent and nep-sbm
Date: 2016-05
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01373017
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Published in Applied Economics, Taylor & Francis (Routledge), 2016, 48 (57), pp.5563-5580. 〈http://www.tandfonline.com/doi/full/10.1080/00036846.2016.1181829〉. 〈10.1080/00036846.2016.1181829〉

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