Abstract
This article evaluates the effect of the overdraft facility (or line of credit) policy by comparing a large sample of overdraft facilitated firms and matched non-overdraft facilitated firms from Eastern Europe at sector level. The sample firms are compared with respect to rates of different performance indicators including: technical efficiency (a Data Envelopment Analysis – DEA – approach is applied to estimate technical efficiency level for individual sectors), production workers trained, expenditures of R&D, and export activity. In order to avoid the selectivity problem, propensity score matching methodologies are adopted. Results suggest that a certain level of overdraft facility given to a firm would be needed to stimulate investment in R&D, which will eventually result in growth in productivity.
Highlights
The overdraft facility1 policy from private financial institutions provides financial support to increase firms’ accessibility to private financing sources
We evaluate the effect of the overdraft facility policy in terms of Human Capital, Technological Capital, competitiveness and the firm’s technical efficiency in the Eastern European Union Industrial firms, by comparing overdraft facilitated firms and nonoverdraft facilitated firms
Another trait to consider is the characteristic of its productive structure: in the countries of the enlargement, more than 20% of the population was occupied in the agricultural sector whereas in the EU15 that percentile was of 4.8%
Summary
The overdraft facility policy from private financial institutions provides financial support to increase firms’ accessibility to private financing sources. Even though there have been some qualitative remarks on the effectiveness of the policy, an evaluation of the overdraft facility policy has not been conducted systematically in terms. Journal of Business Economics and Management, 2013, 14(5): 886–902 of methodology and data, especially in Eastern European Union Industrial firms. We evaluate the effect of the overdraft facility policy in terms of Human Capital (production workers trained), Technological Capital (expenditures of R&D), competitiveness (sales export level) and the firm’s technical efficiency in the Eastern European Union Industrial firms, by comparing overdraft facilitated firms and nonoverdraft facilitated firms. The amount of funds allocated to the overdraft facility policy is huge and the number of targeted firms is large. In contrast to previous enlargements, the entering of Eastern European countries has peculiar characteristics due to the large.
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