As part of the series of the „Finance Research Seminar“, sportsbet sports betting welcomes Victoria Vanasco from sportsbet sports betting en Economia International to present her sportsbet sports betting paper.
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Paper
Banks vs. Firms: Who Benefits sportsbet sports betting Credit Guarantees?
(sportsbet sports betting with Alberto Martin and Sergio Mayordomo)
Governments often support private credit with guarantee schemes, compensating lenders for borrower defaults. Such schemes often rely on banks to allocate guarantees among borrowers, but how banks do so is not well understood. We study this in an economy where entrepreneurial effort is crucial for efficiency but not contractible, creating a debt overhang problem. Credit guarantees can alleviate this problem only if they lower repayment obligations. We show that banks follow a pecking order, prioritizing risky, highly indebted firms from whom they extract more guarantee surplus by increasing repayment obligations. The competitive equilibrium is inefficient: a social planner would tilt the allocation towards more productive firms and pass sportsbet sports betting benefits through lower repayments. Our findings align with evidence from guarantees granted in Spain post-COVID.
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