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This article evaluates the effect of the
overdraft facility (or line of credit) policy by comparing a
large sample of overdraft facilitated firms and matched
non-overdraft facilitated firms from Eastern Europe at the
sector level. The sample firms are compared with respect to
rates of different performance indicators including:
technical efficiency (a Data Envelopment Analysis approach
is applied to estimate the technical efficiency level for
individual sectors), production workers trained,
expenditures on research and development, and export
activity. In order to avoid the selectivity problem,
propensity score matching methodologies are adopted. The
results suggest that a certain level of overdraft facility
provided to firms would be needed to stimulate investment in
research and development, which will eventually result in
increased growth in productivity.
