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- Publisher
- Wiley
- Copyright
- Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 2577-6975
- eISSN
- 2577-6983
- DOI
- 10.1111/1468-0351.00037
- Publisher site
- See Article on Publisher Site
Abstract
In this paper we use a survey of 281 Czech, Hungarian and Polish newly‐established small private firms in order to shed some light on the constraints these firms face in the credit market. The results of our survey show that imperfections in capital markets in Central European economies do not seem to actually inhibit the growth of new private firms. Credit markets do exist for de novo private firms in the three Central European transition economies studied, and they provide quite a large amount of financing from an early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms are concerned: loss‐making de novo firms have a lower probability of getting credit than profitable ones. Banks protect themselves against the risk of a deteriorating pool of borrowers by requiring collateral for their loans. We do not find convincing evidence concerning the existence of adverse selection. Loss‐making firms are not ready to pay higher interest rates than profitable firms and are not more likely to ask for credit than profitable firms.
Journal
Economics of Transition and Institutional Change – Wiley
Published: Mar 1, 2000
Keywords: ; ; ; ;