Banks vs. firms: who benefits from credit guarantees?
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- dc.contributor.author Martin, Alberto
- dc.contributor.author Mayordomo, Sergio
- dc.contributor.author Vanasco, Victoria
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2024-11-14T10:09:31Z
- dc.date.available 2024-11-14T10:09:31Z
- dc.date.issued 2023-04-03
- dc.date.modified 2024-11-14T10:08:54Z
- dc.description.abstract Many countries implemented large-scale programs to guarantee private credit in response to the outbreak of COVID-19. Yet the role of banks in allocating guarantees - and thus in shaping their effects - is not well understood. We study this role in an economy where entrepreneurial effort is crucial for efficiency but it is not contractible, giving rise to a debt overhang problem. In such an environment, credit guarantees increase efficiency to the extent that they allow firms to reduce their repayment obligations. We show that banks follow a pecking order when allocating guarantees, prioritizing riskier, highly indebted, firms, from whom they can extract more surplus. The competitive equilibrium is constrained inefficient: all else equal, the planner would tilt the allocation of guarantees towards more productive, safer firms, and would fully pass-through the benefits of guarantees to firms in the form of lower repayments. We confirm the model's main predictions on the universe of all credit guarantees granted in Spain following the outbreak of COVID.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1862
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/68542
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1862
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword credit guarantees
- dc.subject.keyword debt overhang
- dc.subject.keyword liquidations.
- dc.subject.keyword Macroeconomics and International Economics
- dc.title Banks vs. firms: who benefits from credit guarantees?
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper