Mutual guarantee institutions and small business finance

A large body of literature has shown that small firms experience difficulties in accessing the credit market due to informational asymmetries. Banks can overcome these asymmetries through relationship lending, or at least mitigate their effects by asking for collateral. Small firms, especially if they are young, have little collateral and short credit histories, and thus may find it difficult to raise funds from banks. In this paper, we show that even in this case, small firms may improve their borrowing capacity by joining mutual guarantee institutions (MGIs). Our empirical analysis shows that small firms affiliated with MGIs pay less for credit compared with similar firms which are not MGI members. We obtain this result for interest rates charged on..

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Authors:	Columba, Francesco ; Gambacorta, Leonardo ; Mistrulli, Paolo Emilio
Institutions:	Bank for International Settlements / Monetary and Economic Dept
Subject:	Finanzwirtschaft \| corporate finance \| Monitoring \| monitoring \| Mikrofinanzierung \| Haftung \| liability

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Extent:	143360 bytes 22 p. application/pdf
Series:	Working Papers Bank of International Settlement BIS Working Paper ; No 290 (2009)
Type of publication:	Book / Working Paper
Language:	English
ISSN:	1682-7678
Classification:	D82 - Asymmetric and Private Information ; G21 - Banks; Other Depository Institutions; Mortgages ; G30 - Corporate Finance and Governance. General ; O16 - Financial Markets; Saving and Capital Investment ; Procurement of capital. General ; Management of financial services: stock exchange and bank management science (including saving banks) ; Individual Working Papers, Preprints ; Global Resources
Source:	USB Cologne (business full texts)