Bank Funding and Credit Risk of Hungarian Firms: A Study of a Developing Market in a Transition Economy
Posted: 25 Aug 1999
This paper examines the relationships between various owner, firm, and industry characteristics of private-sector Hungarian firms and their difficulty in obtaining bank loans in 1991. We identify several factors that are related to the difficulty firms face in obtaining bank loans including the personal history of the owner of the firm, and characteristics of the firm and its industry. Firms whose owners had business experience or who were past members of the nomenklatura had less difficulty obtaining bank loans than other firms. It was more difficult to obtain loans for firms that leased their plant than firms that did not. Further, the greater the competition faced by a firm the more difficult it was for the firm to get a loan. Finally, there is evidence that the difficulty of obtaining a loan varies by industry.
JEL Classification: G21, G32
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