0
$\begingroup$

I'm new to the economics exchange environment. My question may seem amateurish, but I did not find a satisfactory result by doing the necessary literature search.

A question that has been on my mind lately is as follows; If governments support some companies for bank loans (for example, interest rate cuts, etc.), does this negatively affect their power to create added value for the future? Because in my opinion, bank loan aids given disproportionately to the firm's assets will definitely reduce its power to generate added value. The link with Asset, which I think is organic, is purely instinctive and my own interpretation, it has no basis. A study examining the relationship between bank loan supports and the power to create value will shed light on these questions.

I respectfully request an academic study on this subject or the valuable comments of members who are familiar with economics / econometrics.

$\endgroup$
1
  • $\begingroup$ It is not quite clear what you are asking. How would you measure "power to generate added value"? $\endgroup$
    – Giskard
    Jun 25 at 19:52
0
$\begingroup$

does this negatively affect their power to create added value for the future?

You seem to answer your own question ("bank loan aids given disproportionately to the firm's assets will definitely reduce its power to generate added value", emphasis added), but the conclusion does not follow from the premise. Basically you have a preconceived idea and expect/request others to provide support for it.

If anything, facilitating bank loans will encourage the genuine enterprises to pursue added value, in part because leverage is greater.

It can also lure fraudulent debtors, but that is outside the scope of your question because talking about "power to generate added value" is pointless where a debtor does not even have the intention to generate added value.

Facilitating bank loans tends to deprive other genuine/deserving applicants of getting a loan. The genuine entrepeneur's advantageous condition is likely to result in him achieving a greater market share. Except for scenarios where an inefficient monopoly ensues, that advantage would translate to increasing that entrepeneur's power to generate added value.

$\endgroup$
1
  • $\begingroup$ Actually I don't wanna seem to answer my own question. I have just some prejudice that makes me think that way. Thank you for your explanatory comment which supports my thoughts. Would you suggest me an academic paper that scrutinizing this subject ? Regards. $\endgroup$ Jun 26 at 10:24

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.