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Credit rationing or overlending:Who is right ?

Jean Bonnet (), Sylvie Cieply and Marcus Dejardin ()
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Sylvie Cieply: Normandie University, Caen, Institut Banque-Assurance - CREM CNRS UMR6211, France

Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS

Abstract: There is a widespread belief in both academic literature and policy circles that small firms are 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 contrastingly that firms can benefit from an excess of credit. This empirical article is the first to test these two theories using data on the access to 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. Finally, we identify factors closely associated with credit rationing and overlending.

Keywords: Credit Rationing; Overlending; Asymmetric information; New business (search for similar items in EconPapers)
JEL-codes: L26 M13 D82 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ent and nep-sbm
Date: 2013-03
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Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:201309

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