Please use this identifier to cite or link to this item: http://hdl.handle.net/11718/18237
Title: Do Programs Mandating Small Business Lending Disincentivize Growth? Evidence from a Policy Experiment
Authors: Prabhala, N R
Keywords: Small Business;Disincentivize Growth;Policy Experiment
Issue Date: 4-Jul-2016
Publisher: Indian Institute of Management, Ahmedabad
Abstract: Exploiting discontinuities in program eligibility, we show that small-firm lending mandates inhibit firm growth. Firms newly qualified under lending mandates near the upper threshold for treatment have lower growth in investment, sales, and a nonaccounting measure, power consumption. The effects are more pronounced for more constrained firms and those borrowing from banks facing shortfalls in meeting lending targets. Establishment level data show similar program-induced distortions in firm size. Our results suggest that financial constraints matter: firms give up growth to retain credit access. However, solving small firm constraints through lending mandates on banks could counterintuitively slow growth so that target firms remain small and banks find it easier to meet statutory targets. Co-Authors: Gursharan Bhue, University of Chicago and Prasanna Tantri, Indian School of Business
Description: The R & P seminar held at Wing 11 Committee Room, IIM Ahmedabad on July 4, 2016 by Dr. N R Prabhala, Chief Mentor and Head of Research at CAFRAL on "Do Programs Mandating Small Business Lending Disincentivize Growth? Evidence from a Policy Experiment".
URI: http://hdl.handle.net/11718/18237
Appears in Collections:R & P Seminar

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