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Regional favoritism in access to credit

Author

Listed:
  • Francis Osei-Tutu

    (Paris School of Business)

  • Laurent Weill

    (University of Strasbourg
    MGIMO University)

Abstract

We examine the effect of regional favoritism on the access of firms to credit. Using firm-level data on a large sample of 29,000 firms covering 47 countries, we investigate the hypothesis that firms in the birth regions of national political leaders have better access to credit. Our evidence suggests that firms located in birth regions of political leaders are less likely to be credit constrained. We further find that firms in leader regions feel less discouraged in applying for loans and also get preferential lending from banks.

Suggested Citation

  • Francis Osei-Tutu & Laurent Weill, 2024. "Regional favoritism in access to credit," Public Choice, Springer, vol. 200(1), pages 293-321, July.
    • Handle: RePEc:kap:pubcho:v:200:y:2024:i:1:d:10.1007_s11127-024-01155-3
    DOI: 10.1007/s11127-024-01155-3
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    More about this item

    Keywords

    Regional favoritism; Access to credit; Borrower discouragement;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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