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The effects of financial support policies on corporate decisions by SMEs

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Title The effects of financial support policies on corporate decisions by SMEs
Similar Titles
Material Type Articles
Author(English)

Nam, Changwoo

Publisher

[Sejong, South Korea]:Korea Development Institute

Date 2016-08
Journal Title; Vol./Issue KDI Journal of Economic Policy:vol. 38(no. 3)
Pages 28
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Industry and Technology < Entrepreneurship
Holding Korea Development Institute

Abstract

This paper investigates the effectiveness of public credit guarantee programs and interest-support programs for SMEs (small and medium enterprises). First, assuming that there is an imperfect information structure in the SME loan market, we analyze how SME support financial programs affect the corporate decisions made by SMEs with regard to default or loan sizes. In addition, this paper theoretically computes the optimal levels of credit guarantee amounts and the interest-support spread under equilibrium with imperfect information in a competitive loan market. Second, the paper
empirically analyzes the continuous policy-treatment effect with the GPS (generalized propensity score) method. In particular, we consider the ratio of guaranteed debt to the total debt as a continuous policy treatment. The empirical results show that marginal effects of a credit guarantee on SMEs’ productivity, profitability, and growth potential decrease with the ratio of guaranteed debt to the total debt. In addition, the average effect of a credit guarantee is maximized when this ratio is at 50% to 60%.