Collateral and Bank Credit – a Puzzle

Aneta Dzik-Walczak,Natalia Nehrebecka

doi:10.26417/ejes.v7i1.p179-198

Abstract

The impact of firms characteristics on bank debt financing has always been a field of conflicts among economists (e.g. trade-off theory vs. pecking order theory). The pecking order theory predicts that firms holding more tangible assets are less prone to asymmetric information problems and reduce the agency cost. Generally, the supply of bank loans is expected to be higher for firms with higher collateral. In the empirical literature, this relationship is not always confirmed. We analyse this phenomenon from three points of view: meta-analysis of literature, country level data and case of Poland. This study provides a systematic analysis of the empirical literature on the usage of bank debt by conducting a meta-analysis. In particular, the problem of publication selection bias is discussed. We explore the sources of heterogeneity among studies including moderator variables in random- and fixed effects regressions. Our results indicate that there is an evidence of publication selection. Based on country level data we conclude that the impact of collateral on bank credit is negative. For Polish case we find that the impact of collateral on debt is positive, except for the subsample of large enterprises.

Highlights

Kosovo in the 1990s experienced a total collapse of the economic and fiscal system
The F-statistics values in this study indicated that total actual revenue and value added tax (VAT) were jointly and significantly affecting economic growth of Adamawa state at 1 percent significant level. . (Haruna, Kumshe, Magaji and Bani, 2015)
Based on this we can conclude that this tax is the main contributor to the economic growth of the country based on the findings of other authors that government revenues have a positive impact on the economic growth of the country

Summary

Introduction

After the end of the armed conflict and after the declaration of independence from Serbia, it built a new economic system which enabled it to raise public revenues to cover public spending. At first it was a challenge for new institutions because the main purpose was to fill ark of the state and the low level of public revenue was a major obstacle to Kosovo's economic growth. Taxes have played and remain of particular importance, both in terms of budget revenue collection and participation in Gross Domestic Product (GDP) (Berisha, 2015)

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