Overdraft Facility Policy and Firm Performance : An Empirical Analysis in Eastern European Union Industrial Firms

This article evaluates the effect of the overdraft facility (or line of credit) policy by comparing a large sample of overdraft facilitated firms and matched non-overdraft facilitated firms from Eastern Europe at the sector level. The sample firms are compared with respect to rates of different performance indicators including: technical efficiency (a Data Envelopment Analysis approach is applied to estimate the technical efficiency level for individual sectors), production workers trained, expenditures on research and development, and export activity. In order to avoid the selectivity problem, propensity score matching methodologies are adopted. The results suggest that a certain level of overdraft facility provided to firms would be needed to stimulate investment in research and development, which will eventually result in increased growth in productivity.

Bibliographic Details

Main Authors:	Castillo, Leopoldo Laborda, Guasch, Jose Luis
Language:	English en_US
Published:	World Bank, Washington, DC 2012-06
Subjects:	ACCESS TO CREDIT, ACCESS TO EXTERNAL FINANCE, ACCESS TO FINANCE, ACCESSIBILITY, ADVERSE SELECTION, AGRICULTURAL SECTOR, ALLOCATIVE EFFICIENCY, ASYMMETRIC INFORMATION, ATTRITION, AVAILABILITY OF COLLATERAL, BALANCE SHEET, BANKS, BENCHMARK, BENEFICIARIES, BIASES, BOOK VALUE, BUDGETARY DEFICIT, BUSINESS ECONOMICS, CAPITAL CONSTRAINT, CAPITAL STOCK, CASH FLOW, CERTAIN EXTENT, COLLATERAL, COMPARATIVE ANALYSES, COMPARATIVE ECONOMICS, COMPETITIVENESS, COMPLIANCE COSTS, CONTRACT ENFORCEMENT, CREDIT DEFAULT, CREDIT GUARANTEE, CREDIT LINE, CREDIT MARKETS, CREDIT RATIONING, CRITICAL SURVEY, CROWDING OUT, DECISION MAKING, DEFAULT RATE, DEFICITS, DEMOCRATIC INSTITUTIONS, DEVELOPMENT BANK, DEVELOPMENT ECONOMICS, DEVELOPMENT FINANCE, DEVELOPMENT POLICY, DOMESTIC CREDIT, DOMESTIC MARKET, DRIVERS, DUMMY VARIABLE, DUMMY VARIABLES, ECONOMETRICS, ECONOMIC CHARACTERISTICS, ECONOMIC GROWTH, ECONOMIC POLICY, ECONOMIC SURVEYS, ECONOMIC SYSTEM, ECONOMIC THEORY, ECONOMICS, ECONOMICS RESEARCH, EDUCATION LEVELS, EMPIRICAL ANALYSIS, ENROLLMENT, ENTREPRENEURS, ENVIRONMENTAL, EQUILIBRIUM, EQUIPMENT, EVALUATION OF LOAN APPLICATIONS, EXCHANGE RATE, EXCHANGE RATES, EXPENDITURE, EXPENDITURES, EXPLOITATION, EXPORTER, EXPORTERS, EXPORTS, FINANCIAL CRISIS, FINANCIAL DIFFICULTIES, FINANCIAL MARKETS, FINANCIAL SERVICES, FINANCIAL STATEMENTS, FINANCIAL SUPPORT, FIRM PERFORMANCE, FIXED CAPITAL, FOREIGN BANKS, FOREIGN INVESTMENT, FULL EMPLOYMENT, FUNCTIONAL FORMS, FUTURE RESEARCH, GDP, GDP PER CAPITA, GENDER, GOVERNMENT POLICY, GOVERNMENT SUPPORT, GROSS DOMESTIC PRODUCT, GROWTH POTENTIAL, GUARANTEE SCHEME, GUARANTEE SCHEMES, HUMAN CAPITAL, IMPERFECT INFORMATION, INCOME LEVEL, INFLATION, INNOVATION, INSTRUMENT, INTEREST RATES, INTERMEDIATE INPUTS, INTERNAL FINANCE, INTERNATIONAL BANK, INVESTMENT CLIMATE, INVESTMENT FLOWS, LABOUR, LABOUR MARKET, LABOUR MARKET POLICIES, LAND OWNERSHIP, LENDERS, LEVELS OF ACCESS, LINE OF CREDIT, LIQUIDITY, LOAN, LOAN APPLICANT, LOAN CONTRACTS, LOAN GUARANTEE, LOAN MARKET, LOCAL CURRENCY, MACROECONOMIC POLICY, MARKET ECONOMY, MARKET ENVIRONMENT, MARKET FAILURE, MARKET SHARE, MARKET SIZE, MATHEMATICAL MODELS, MAXIMUM LIKELIHOOD ESTIMATION, METALS, MIDDLE INCOME COUNTRY, MONETARY FUND, MORAL HAZARD, MOTIVATION, OUTPUTS, OVERDRAFT, OVERDRAFT FACILITIES, OVERDRAFT FACILITY, PER CAPITA INCOME, PRICE VOLATILITY, PRIVATE FINANCIAL INSTITUTIONS, PRIVATE FINANCIAL SECTOR, PRIVATE FINANCING, PRODUCERS, PRODUCTION CAPACITY, PRODUCTION COSTS, PRODUCTION FUNCTION, PRODUCTION INCREASES, PRODUCTIVE RESOURCES, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROFITABILITY, PUBLIC FINANCE, PUBLIC-PRIVATE PARTNERSHIPS, RECESSION, RED TAPE, RESOURCE ALLOCATION, SELF-EMPLOYMENT, SKILLED WORKERS, SMALL BUSINESS, SOCIAL COHESION, SOURCES OF FINANCE, START-UP, TARIFF BARRIERS, TOTAL COSTS, TRADE BALANCE, UNION, VALUE ADDED, VENTURE CAPITAL, WAGES, WORKING CAPITAL,
Online Access:	http://documents.worldbank.org/curated/en/2012/06/16402328/overdraft-facility-policy-firm-performance-empirical-analysis-eastern-european-union-industrial-firms https://hdl.handle.net/10986/9319
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