Public guarantees: a countercyclical instrument for SME growth. Evidence from the Spanish Region of Madrid

García, Rodrigo Martín; Santor, Jorge Morán

doi:10.1007/s11187-019-00214-0

Cited by 19 publications

(4 citation statements)

References 73 publications

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“…Much existing literature highlights the benefits of public guarantee programs on subsidized companies in terms of economic performance (Lelarge et al, 2010), productivity and employment (Kang & Heshmati, 2008;Martín-García & Morán Santor, 2021), investments in intangible assets and research and development (Heshmati, 2013). On the other hand, other studies show how access to public guarantees can have negative impacts on a firm's risk of default, especially when broad eligibility criteria are used (Lagazio et al, 2021).…”

Section: Discussionmentioning

confidence: 99%

“…The actual effectiveness of a guarantee programme can depend on the selection criteria used and the level of opacity of eligible firms, which is affected by the size of the company and its sector (Graham, 2004 ; Uesugi et al, 2010 ). Martìn-Garcìa and Morán Santor ( 2021 ) show that public credit guarantees have the greatest impact on micro-enterprises (those with fewer than 10 employees), which are opaquer and, consequently, more affected by barriers to finance. Economic additionality also depends on the industry in which a firm operates.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

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How does government-backed finance affect SMEs’ crisis predictors?

2023

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This paper estimates the impact of public guarantees on crisis predictive indicators among small and mid-size enterprises (SMEs). We use a confidential database provided by the Italian Ministry of Economic Development on the universe of guarantees granted by the Central Guarantee Fund. We apply difference-in-difference regressions and propensity-score matching estimators to a sample of approximately 40,000 SMEs over the 2010–2018 period. We find that obtaining a public guarantee improves profitability both in the short- and medium-term. On the other hand, SMEs’ financial health worsens in the short run, but financial burdens are alleviated 2 years after the issuance of a guarantee. The economic and financial effects of government-backed loans are amplified for micro-sized firms, companies operating in the service sector and direct guarantees. Our results can thus support public authorities in designing credit guarantee schemes capable of preventing SMEs’ zombification and protecting them from the risk of debt overhang.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

How does government-backed finance affect SMEs’ crisis predictors?

2023

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“…Lack of financial resources is still considered one of the most common barriers to individuals willing to become entrepreneurs (Kersten et al, 2017). To overcome this constraint, many governments started offering financial instruments, such as soft loans, that is, with subsidised/reduced interest rates (Grimm and Paffhausen, 2015; Nyikos et al, 2020) and partial or full-credit guarantees for loans as a part of loan guarantee schemes (Cowling, 2010; Gai et al, 2016; Lagazio et al, 2021; Martín-García and Morán Santor, 2021). Generally, the mechanism of change assumes that the borrowed public resources (or those allocated for guarantees in the case of loan defaults) will return back to the economy in the form of enhanced competitiveness of the supported businesses and newly created job opportunities, contributing thus to the overall regional economic development (Dvouletý et al, 2019; Kersten et al, 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

UK government-backed start-up loans: Tackling disadvantage and credit rationing of new entrepreneurs

Cowling

Dvouletý

2022

International Small Business Journal: Researching Entrepreneurs

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In 2012, the UK government made the decision to offer loans to new entrepreneurs who were excluded from the credit market through the start-up loan (SUL) scheme. By 2021, loans totalling £759 million have been issued to 85,809 new start-ups. A disproportionate share of these SULs was issued to previously unemployed people to support their transition into self-employment. This paper questions whether those who started with the fewest resources achieved better or worse outcomes than those who started from a more beneficial position. Our findings show that previously unemployed start-ups had smaller loans and that they had a higher default hazard on their loans than entrants from waged employment, but more educated and older unemployed entrants survived longer. More generally, SULs to unemployed start-ups were cost-effective for the government in a loan portfolio sense, but once the benefits of supported entry into self-employment were fully accounted for, the overall contribution was very positive. This highlights the potential more comprehensive societal benefits of removing capital constraints by supporting the transition from unemployment to self-employment. Furthermore, we propose testing the effect of replacement start-up subsidies by soft loans in those countries, offering only direct grants, to increase the efficiency of public financial resources.

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“…and regions as a source of financing. Therefore, regional finance is a benchmark for determining capacity in carrying out autonomous tasks, in addition to other benchmarks such as natural resource capabilities, demographic conditions, potential, and community participation in the regions (Martin & Moran, 2019;Lu & Lu, 2020).…”

Section: Introductionmentioning

confidence: 99%

Local Government Financial Ability in Doing Regional Loans in The Covid-19 Pandemic Era

Fery

2022

JIKA

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The purpose of this study was to determine the financial capacity of local governments in making regional loans in the era of the COVID-19 pandemic. The results of the study stated that regional revenue is a source of capital, which is collected and used to finance various regional development implementation activities. The method used is Structural Equation Modeling PLS, population of this research is carried out on local government organizations, namely related sub-units in the section of the Regional Secretariat, DPRD Secretariat, Inspectorate, Service and Agency in Musi Banyuasin Regency totaling 37 people. The results show that the financing of regional autonomy requires the ability of local governments to explore sources of revenue that are not dependent on the central government. Keywords: Regional Finance; Regional Loans; Regional Revenue; Regional Development; Local Government Tujuan penelitian ini untuk mengetahui kemampuan keuangan pemerintah daerah di dalam melakukan pinjaman daerah era pandemi covid-19. Hasil penelitian menyatakan bahwa penerimaan daerah merupakan sumber modal, yang dihimpun dan dimanfaatkan untuk membiayai berbagai kegiatan pelaksanaan pembangunan daerah. Metode yang digunakan yaitu Structural Equation Modeling PLS, populasi penelitian ini dilakukan pada Organisasi Pemerintah Daerah yaitu sub-sub unit terkait pada bagian dari Sekretariat Daerah, Sekretariat DPRD, Inspektorat, Dinas dan Badan di Kabupaten Musi banyuasin berjumlah 37 orang. Hasil penelitian menunjukan bahwa pembiayaan otonomi daerah menuntut adanya kemampuan pemerintah daerah untuk menggali sumber-sumber penerimaan yang tidak tergantung kepada pemerintah pusat. Kata Kunci: Keuangan Daerah; Pinjaman Daerah; Pendapatan Daerah; Pembangunan Daerah; Pemerintah Daerah

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Public guarantees: a countercyclical instrument for SME growth. Evidence from the Spanish Region of Madrid

Cited by 19 publications

References 73 publications

How does government-backed finance affect SMEs’ crisis predictors?

How does government-backed finance affect SMEs’ crisis predictors?

UK government-backed start-up loans: Tackling disadvantage and credit rationing of new entrepreneurs

Local Government Financial Ability in Doing Regional Loans in The Covid-19 Pandemic Era

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