Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216801 
Year of Publication: 
2019
Series/Report no.: 
Economic Working Paper Series No. 1577
Publisher: 
Universitat Pompeu Fabra (upf), Department of Economics and Business, Barcelona
Abstract: 
We analyze a small, new credit facility of a Spanish state-owned bank during the crisis, using its continuous credit scoring system, its firm-level scores, and the credit register. Compared to privately-owned banks, the state-owned bank faces worse applicants, (softens) tightens its credit supply to (un)observed riskier firms, and has much higher defaults, especially driven by unobserved ex-ante borrower risk. In a regression discontinuity design, the supply of public credit causes: large positive real effects to financially-constrained firms (whose relationship banks reduced substantially credit supply); crowding-in of new private-bank credit; and positive spillovers to other firms. Private returns of the credit facility are negative, while social returns are positive. Overall, our results provide evidence on the existence of significant adverse selection problems in credit markets.
Subjects: 
adverse selection
state-owned banks
credit crunch
real effects of public credit
crowding-in
JEL: 
E44
G01
G21
G28
Document Type: 
Working Paper

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