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Cultural Proximity and Loan Outcomes

Author Info

  • Raymond Fisman

    ()

  • Daniel Paravisini

    ()

  • Vikrant Vig

    ()

Abstract

Evidence is presented to show that shared codes, religious beliefs, ethnicity - cultural proximity - between lenders and borrowers improves the efficiency of credit allocation. In-group preferential treatment is identified using dyadic data on the religion and caste of bank officers and borrowers from a bank in India, and a rotation policy that induces exogenous matching between officers and borrowers. Cultural proximity increases lending on both intensive and extensive margins and improves repayment performance, even after the in-group officer is replaced by an out-group one. Further, cultural proximity increases loan dispersion and reduces loan to collateral ratios. [BREAD Working Paper No. 345]. URL:[http://ipl.econ.duke.edu/bread/papers/working/345.pdf]

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Paper provided by eSocialSciences in its series Working Papers with number id:5036.

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Date of creation: Jul 2012
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Handle: RePEc:ess:wpaper:id:5036
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Keywords: India; Caste; Religion; Lending discrimination; finance; religious beliefs; ethnicity; cultural proximity; lenders; borrowers; bank; credit allocation; financial constraints; loan;

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Find related papers by JEL classification:
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • 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

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Cited by:

  1. repec:ese:iserwp:2014-33 is not listed on IDEAS
  2. Beck, T.H.L. & Behr, P. & Madestam, A., 2012. "Sex and Credit : Is there a Gender Bias in Lending?," Discussion Paper 2012-062, Tilburg University, Center for Economic Research.
  3. repec:dgr:kubcen:2012062 is not listed on IDEAS
  4. Brogaard, Jonathan & Engelberg, Joseph & Parsons, Christopher A., 2014. "Networks and productivity: Causal evidence from editor rotations," Journal of Financial Economics, Elsevier, vol. 111(1), pages 251-270.
  5. Eliasson, Tove, 2014. "Immigrant entrepreneurship and the origin of bankers," Working Paper Series 2014:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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