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Education and Credit: A Matthew Effect

Author

Listed:
  • Manthos D. Delis
  • Yota Deli
  • José-Luis Peydró
  • Adele Whelan

Abstract

Using a unique corporate loans dataset for entrepreneurs with small and microenterprises, this paper examines how educational attainment affects bank credit decisions and subsequent individual and firm outcomes. Our results highlight a “Matthew Effect,” where an initial advantage is self-amplifying. We find that entrepreneurs who obtain university education are more likely to apply for credit, and receive higher credit scores, and better lending terms. Via this credit channel, such entrepreneurs have significantly better future firm outcomes compared to those without a university education. Furthermore, we find a key role for investments in innovation, intangible assets, and lower within-firm pay inequality.

Suggested Citation

  • Manthos D. Delis & Yota Deli & José-Luis Peydró & Adele Whelan, 2022. "Education and Credit: A Matthew Effect," Working Papers 202214, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:202214
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    File URL: http://hdl.handle.net/10197/12956
    File Function: First version, 2022
    Download Restriction: no
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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