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On the determinants of credit rationing: Firm-level evidence from transition countries

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  • Drakos, Konstantinos
  • Giannakopoulos, Nicholas
Abstract
Using survey data for firms from Eastern European transition economies we investigate the determinants of credit rationing. Our rationing definition incorporates firms whose loan application was rejected, but also ‘discouraged’ potential borrowers. We employ a bivariate probit with censoring, approach that accounts for the underlying selectivity since rationed firms are a subset of those without a loan. We include firm-specific attributes related to the alleviation of informational asymmetries, and therefore expected to affect credit rationing. We find that credit rationing depends on firm size, profitability, sales growth, ownership type, legal status, sectoral heterogeneity and the country-specific level of domestic credit.

Suggested Citation

  • Drakos, Konstantinos & Giannakopoulos, Nicholas, 2011. "On the determinants of credit rationing: Firm-level evidence from transition countries," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1773-1790.
    • Handle: RePEc:eee:jimfin:v:30:y:2011:i:8:p:1773-1790
    DOI: 10.1016/j.jimonfin.2011.09.004
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    More about this item

    Keywords

    Bivariate probit; Censoring; Credit rationing; Transition;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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