Title: Information Asymmetry in SME Credit Guarantee Schemes: Evidence from Japan
Abstract: In this paper, we investigate whether adverse selection and/or moral hazard can be detected in credit guarantee schemes for small and medium enterprises (SMEs). Using bank-level data, we analyzed whether the subrogation rate is positively associated with the ratio of guaranteed loans to total loans, and found that the data are consistent with an adverse selection and/or moral hazard hypothesis. Further analyses show that the relationship is stronger for 100% coverage than for 80% coverage, indicating that 20% self-payment mitigates the problem, but is not enough to eliminate it.
Publication Year: 2014
Publication Date: 2014-07-01
Language: en
Type: preprint
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Cited By Count: 6
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