The effects of mutual guarantee consortia on the quality of bank lending

Columba, Francesco and Gambacorta, Leonardo and Mistrulli, Paolo Emilio (2009): The effects of mutual guarantee consortia on the quality of bank lending. Published in: Revue Bancaire et Financiere , Vol. 4, (2009): pp. 226-232.

Abstract

In this paper we investigate whether or not mutual guarantee consortia (MGC), a financial institution well developed in Italy, alleviate the difficulties that Small and Medium Enterprises (SMEs) face when they ask for a bank loan. We find that the probability of a small firm affiliated to a MGC of going into default is lower than that of firms not affiliated to such a consortium. These results indicate that MGCs improve the ability of banks to screen and monitor small firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: bank credit, financial intermediaries, small and medium enterprises, bad debt.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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