Bank credit and legal status in Moroccan manufacturing

Moroccan manufacturing firms generally choose to incorporate under one of two legalforms: ‘Société Anonyme’ (SA) and ‘Société À Responsibilité Limitée’ (SARL). This thesis is about that choice and its consequence for firms’ access to bank overdraft facilities.In 2001, Morocco made a radical change to its company law regime: it replaced a company law dating from 19th-century France with modern standards of corporate governance and accountability. In Chapter One, I use the two-period FACS/ICA panel to analyse that reform and to evaluate its impact upon manufacturing firms’ access to bank credit. I find that the reform induced a substantial share of SA firms to switch to SARL, and that — relative to firms remaining in the SA status — this caused a significant and substantial withdrawal of bank overdraft facilities.In Chapter Two, I develop a theoretical model in which an agent signals its continuoustype by using a variable that may take one of only two values (a ‘binary signal’); thisis intended to represent a firm’s choice of legal status. I show that this binary signalprovides only ‘coarse information’, and I consider the consequences of this coarseness;I solve for equilibrium conditions and I consider both the role of a principal’srisk aversion and the role of other observable agent characteristics (‘indices’).Chapter Three uses the results of Chapter Two to develop a new structural methodologyfor the separate identification of information and incentive effects. I apply the method to the data used in Chapter One, on the subset of firms having an overdraftfacility in both survey periods (approximately two-thirds of the total sample). I find that, among that limited sample, there is no relevant information asymmetry. I estimate the potential welfare loss and conclude that, in the 95% confidence region of potential information effects and incentive effects, the maximum median welfare loss from information asymmetry is equivalent to approximately only 3% of the medianbank overdraft limit. For the sample of firms having an overdraft facility in both surveyperiods, this challenges the common narrative that information asymmetry is an important reason for bank credit market failure.