Access to Credit and Bank Ownership: Evidence from Firm-Level Data

This paper uses a unique dataset with matched information at the firm-bank level covering 13,000firms and 550 banks in 36 emerging and developing economies over 2012–20. The analysis tests whether government-ownedbanks fulfill their social mandate by targeting credit constrained firms or firms that are more likely to generatepositive externalities. The findings show that credit constrained firms are more likely to borrow fromgovernment-owned banks, and that this is especially the case in countries with good institutions. However, the paper doesnot find any evidence that government-owned banks target innovative firms or “green” firms. The findings show that infirms that borrow from government-owned banks, employment reacts less to business cycle conditions relative to firmsthat borrow from private banks. The paper further shows that employment is more stable in credit constrained firms thathave a relationship with a government-owned banks with respect to credit constrained firms that borrow from aprivate bank.