Access to Credit, Risk-Taking and Organizational Change

27 Pages Posted: 25 Jan 2006

See all articles by Guido Friebel

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Date Written: May 2002

Abstract

This paper analyzes workers' choices to sort in large and small firms. Workers care to realize their ideas as they share the associated benefits with the firm. Small firms being less capitalized are more inclined to realize their workers' risky ideas, but better capitalized firms provide safe jobs and insurance against income risks. When households gain better access to credit, this insurance through the job becomes less desirable. Small firms then gain a competitive edge in attracting creative workers. However, as they take on too much risk, this may reduce average enterprise profitability, increase bankruptcy and spur inefficient organizational changes of large firms.

JEL Classification: L2, G3, J62

Suggested Citation

Friebel, Guido and Giannetti, Mariassunta, Access to Credit, Risk-Taking and Organizational Change (May 2002). Available at SSRN: https://ssrn.com/abstract=314724 or http://dx.doi.org/10.2139/ssrn.314724

Guido Friebel

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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