They argued that a too generous and non-selective guarantee provision worsened the firm market environment in two ways: the first was the effect of crowding out the private financial sector. The second and long-term negative effect was to make firms become more dependent on public support<sup>11</sup> .

In the case of Korea, Lee (2006) criticized that firms with low creditability will gradually receive the overdraft facility by excessive supply. It will eventually increase the credit default ratio and hence financial difficulties for government in the end.

Using a data from a cross-section of Bulgarian firms Gatti and Love (2008) estimate the impact of access to credit, as proxied by indicators of whether firms have access to a credit line or overdraft facility, on productivity. To overcome potential omitted variable bias of Ordinary Least Squares (OLS) estimates. These authors find credit to be positively and strongly associated with TFP.

Augier, Dovis and Gasiorek (2010) focuse on the role of the business environment in understanding differences in the performance of Moroccan firms. The evidence on the relationship between credit and productivity is strongly indicative of credit resources misallocation in Morocco.

Kasseeah (2011) studies the link between firm performance and firm characteristics of small and medium-sized enterprises (SMEs) in Mauritius. This author observes that the growth of SMEs in Mauritius depends mainly on access to finance and firm size. Access to finance is captured through access to overdraft facilities, line of credit and self reported measures of access to finance.

Butler and Cornaggia (2011) study the relation between access to finance and productivity. These authors exploit an exogenous shift in demand for a product to expose how producers adapt their productivity in the presence of varying levels of access to finance. These authors find that production increases the most over the sample period in areas with relatively strong access to finance.

Using a panel of Chinese manufacturing firms over the period 2001-2007, Chen and Guariglia (2011) find that, especially for illiquid firms, productivity is strongly constrained by the availability of internal finance. Furthermore, these authors find higher sensitivities of productivity to cash flow for private exporters, but lower sensitivities for foreign exporters.

Finally, Clarkea, Cullb and Kisunkoc (2012) study how country and firm characteristics affected firms‘ financial constraints and their likelihood of survival during the early phase of the recent global financial crisis in Eastern Europe and Central Asia (ECA). These authors find that financial constraints during the crisis were less severe in countries with well-established foreign banks, and that changes in the severity of financial constraints were more pronounced for large firms than others during the crisis. Controlling for other relevant characteristics, firms were more likely to survive the crisis if they had access to external credit.

> 11 The survival of uncompetitive firms with the help of government support might result in a decrease in market share and the profits of competitive firms. Thus, uncompetitive firms might replace competitive ones with overdraft facility policy.

8