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Does money buy credit? Firm-level evidence on bribery and bank debt

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Author Info

  • Fungácová , Zuzana

    ()
    (BOFIT)

  • Kochanova, Anna

    ()
    (BOFIT)

  • Weill, Laurent

    ()
    (BOFIT)

Abstract

This study examines how bribery influences bank debt ratios for a large sample of firms from 14 transition countries. We combine information on bribery practices from the BEEPS survey with firm-level accounting data from the Amadeus database. Bribery is measured by the frequency of extra unofficial payments to officials to “get things done”. We find that bribery is positively related to firms’ bank debt ratios, which provides evidence that bribing bank officials facilitates firms’ access to bank loans. This impact differs with the maturity of bank debt, as bribery contributes to higher short-term bank debt ratios but lower long-term bank debt ratios. Finally, we find that the institutional characteristics of the banking industry influence the relation between bribery and firms’ bank debt ratios. Higher levels of financial development constrain the positive effects of bribery whereas larger market shares of state-owned banks have the opposite effect. Foreign bank presence also affects the impact of bribery, albeit this effect depends on the maturity of firms’ bank-debt.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 4/2014.

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Length: 40 pages
Date of creation: 21 Jan 2014
Date of revision:
Handle: RePEc:hhs:bofitp:2014_004

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: bank lending; bribery; corruption; Eastern Europe;

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References

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Cited by:
  1. Fungácová , Zuzana & Kochanova, Anna & Weill, Laurent, 2014. "Does money buy credit? Firm-level evidence on bribery and bank debt," BOFIT Discussion Papers 4/2014, Bank of Finland, Institute for Economies in Transition.

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