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Culture, Lending Relationships, and the Cost of Credit

Author

Listed:
  • Giorgio Albareto
  • Maddalena Galardo
  • Paolo EmilioMistrulli
  • Bianca Sorvillo

Abstract

We provide evidence on how cultural differences affect loan pricing by using a unique data set from the Italian Credit Register. We show that immigrants pay more for credit compared with natives and that this difference is smaller for immigrants who have Italian parents and for those belonging to the Christian religion. Furthermore, we find that the gap between immigrants and natives narrows as the amount of information shared among lenders through the credit register increases. This suggests that most of the higher cost of credit paid by immigrants is due to statistical discrimination rather than taste-based discrimination. (JEL G21, J15, J71)

Suggested Citation

  • Giorgio Albareto & Maddalena Galardo & Paolo EmilioMistrulli & Bianca Sorvillo, 2022. "Culture, Lending Relationships, and the Cost of Credit," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(3), pages 736-774.
    • Handle: RePEc:oup:rcorpf:v:11:y:2022:i:3:p:736-774.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfac002
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    Cited by:

    1. Paolo Emilio Mistrulli & Md Taslim Uddin & Alberto Zazzaro, 2023. "Discrimination of Immigrants in Mortgage Pricing and Approval: Evidence from Italy," CSEF Working Papers 675, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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