Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection
This paper develops a model showing that inefficient legal protections disproportionately increase financial restrictions for creditors that have less wealth. Due to fixed monitoring costs in equilibrium, banks will not monitor small firms, and therefore these firms will adopt risky technologies that imply a higher probability of bankruptcy. This implies that inefficiencies in the bankruptcy procedure will have a greater effect on small firms vis-à-vis large ones. Using a survey of firms in 62 countries around the world (WBES) and econometric techniques that allow us to deal with observed and unobserved country-specific components, as well as with partial endogeneity, the paper explore the role of creditor protection on small and medium-size enterprises access to bank credit. It is found that better protection of creditors reduces the financing gap between small and large firms.
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Format: | Working Papers biblioteca |
Language: | English |
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Inter-American Development Bank
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Subjects: | Financial Sector, WP-527, |
Online Access: | http://dx.doi.org/10.18235/0010766 https://publications.iadb.org/en/bank-credit-small-and-medium-sized-enterprises-role-creditor-protection |
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dig-bid-node-98772024-05-30T20:21:26ZBank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection 2005-12-01T00:00:00+0000 http://dx.doi.org/10.18235/0010766 https://publications.iadb.org/en/bank-credit-small-and-medium-sized-enterprises-role-creditor-protection Inter-American Development Bank Financial Sector WP-527 This paper develops a model showing that inefficient legal protections disproportionately increase financial restrictions for creditors that have less wealth. Due to fixed monitoring costs in equilibrium, banks will not monitor small firms, and therefore these firms will adopt risky technologies that imply a higher probability of bankruptcy. This implies that inefficiencies in the bankruptcy procedure will have a greater effect on small firms vis-à-vis large ones. Using a survey of firms in 62 countries around the world (WBES) and econometric techniques that allow us to deal with observed and unobserved country-specific components, as well as with partial endogeneity, the paper explore the role of creditor protection on small and medium-size enterprises access to bank credit. It is found that better protection of creditors reduces the financing gap between small and large firms. Inter-American Development Bank Arturo Galindo Alejandro Micco Working Papers application/pdf IDB Publications The Caribbean Central America South America en |
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Financial Sector WP-527 Financial Sector WP-527 Inter-American Development Bank Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
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This paper develops a model showing that inefficient legal protections disproportionately increase financial restrictions for creditors that have less wealth. Due to fixed monitoring costs in equilibrium, banks will not monitor small firms, and therefore these firms will adopt risky technologies that imply a higher probability of bankruptcy. This implies that inefficiencies in the bankruptcy procedure will have a greater effect on small firms vis-à-vis large ones. Using a survey of firms in 62 countries around the world (WBES) and econometric techniques that allow us to deal with observed and unobserved country-specific components, as well as with partial endogeneity, the paper explore the role of creditor protection on small and medium-size enterprises access to bank credit. It is found that better protection of creditors reduces the financing gap between small and large firms. |
author2 |
Arturo Galindo |
author_facet |
Arturo Galindo Inter-American Development Bank |
format |
Working Papers |
topic_facet |
Financial Sector WP-527 |
author |
Inter-American Development Bank |
author_sort |
Inter-American Development Bank |
title |
Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
title_short |
Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
title_full |
Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
title_fullStr |
Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
title_full_unstemmed |
Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection |
title_sort |
bank credit to small and medium-sized enterprises: the role of creditor protection |
publisher |
Inter-American Development Bank |
url |
http://dx.doi.org/10.18235/0010766 https://publications.iadb.org/en/bank-credit-small-and-medium-sized-enterprises-role-creditor-protection |
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AT interamericandevelopmentbank bankcredittosmallandmediumsizedenterprisestheroleofcreditorprotection |
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1809106609517887488 |