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Credit rationing or overlending:Who is right ?

Author

Listed:
  • Jean Bonnet

    (Normandie University, Caen, Faculty of Economics and Business Administration - CREM CNRS UMR6211, France)

  • Sylvie Cieply

    (Normandie University, Caen, Institut Banque-Assurance - CREM CNRS UMR6211, France)

  • Marcus Dejardin

    (Université Catholique de Louvain and University of Namur, CERPE, Belgium)

Abstract

There is a widespread belief in both academic literature and policy circles that small firms are unable to obtain sufficient banking loans.This idea finds a strong theoretical support in credit rationing theory, as initiated by Stiglitz and Weiss (1981). However, this is vigorously challenged by De Meza and Webb (1987, 2000) suggesting contrastingly that firms can benefit from an excess of credit. This empirical article is the first to test these two theories using data on the access to credit for new French businesses during the mid 1990s. Our results show that credit rationing was not highly spread among French new firms. The story described by De Meza and Webb (1987) appears to be a much more realistic model. Finally, we identify factors closely associated with credit rationing and overlending.

Suggested Citation

  • Jean Bonnet & Sylvie Cieply & Marcus Dejardin, 2013. "Credit rationing or overlending:Who is right ?," Economics Working Paper Archive (University of Rennes & University of Caen) 201309, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    • Handle: RePEc:tut:cremwp:201309
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Credit Rationing; Overlending; Asymmetric information; New business;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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