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Elections hinder firms' access to credit

Author

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  • Florian Léon
  • Laurent Weill

Abstract

To analyze whether the occurrence of elections affects access to credit for firms, we perform an investigation using firm‐level data covering 44 developed and developing countries. The results show that elections impair access to credit. Specifically, firms have lower access to credit in election years and pre‐election years as elections exacerbate political uncertainty. While higher borrower discouragement is a tangible negative effect of elections, their occurrence per se does not seem to affect loan acceptance by banks. We also document that the negative relationship between elections and credit access is shaped by country and election characteristics as well as firm characteristics.

Suggested Citation

  • Florian Léon & Laurent Weill, 2024. "Elections hinder firms' access to credit," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(1), pages 73-107, January.
    • Handle: RePEc:wly:ectrin:v:32:y:2024:i:1:p:73-107
    DOI: 10.1111/ecot.12377
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    References listed on IDEAS

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