Investment and Finance in De Novo Private Firms: Empiracal Results from the Czech Republic, Hungary and Poland

Andrzej Bratkowski, Irena Grosfeld and Jacek Rostowski

No 236, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: In this paper we use a survey of 281 Czech, Hungarian and Polish newly established small private firms in order to shed some light on the constrains these firms face in the credit market. The results of our survey show that imperfections in capital markets in Central European economies do not seem to actually inhibit the growth of Central European transition economies studied, but they provide quite a large amount of financing and do so from a remarkably early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms in the three Central European transition economies studied, but they provide quite a large amount of financing and do so from a remarkably early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms are concerned: loss-making de novo firms have a lower probability of getting credit than profitable ones. Banks protect themselves against the risk of a deteriorating pool of borrowers by requiring collateral for their loans. We do not find convincing evidence concerning the existence of adverse selection. Loss-making firms are not ready to pay higher interest rates than profitable firms and are not more likely to ask for credit than profitable firms.

Keywords: transition; credit marker; investment; financial constraints; start-ups (search for similar items in EconPapers)
JEL-codes: D8 P2 P34 (search for similar items in EconPapers)
Pages: pages
Date: 1999-04-01
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-ent, nep-mfd and nep-tra
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Journal Article: Investment and Finance in de novo private firms: Empirical Results from the Czech Republic, Hungary and Poland (2000)
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