Evaluation of credit guarantee policy using propensity score matching

In this article, we evaluate the effect of the credit guarantee policy by comparing a large sample of guaranteed firms and matched non-guaranteed firms from 2000 to 2003. The sample firms are compared with respect to growth rates of different performance indicators including: productivity, sales, employment, investment, R&D, wage level, and the survival of firms in the post crisis period. In order to avoid the selectivity problem, propensity score matching methodologies are adopted. Results suggest that credit guarantees influenced significantly firms' ability to maintain their size, and increase their survival rate, but not to increase their R&D and investment and hence, their growth in productivity. Moreover, due to the adverse selection problem, firms with lower productivity were receiving guarantees.