Public procurement and bank lending

Anže Burger, Matej Marinč, Sašo Polanec and Patricia Kotnik

Finance Research Letters, 2024, vol. 66, issue C

Abstract: This article unveils that government is intertwined with banking through a hitherto underexplored channel—through public procurement. On a comprehensive firm-level dataset that combines public procurement and accounting data, we apply the difference-in-differences method to show that treated firms that secure a public procurement contract can strengthen their bank borrowing terms. Treated firms obtain a greater amount of bank funding and a higher share of long-term funding at lower interest rates compared to the control firms. The impact on bank lending exceeds the positive impact due to higher revenues and suggests a positive non-revenue channel of public procurement.

Keywords: Public procurement; Government procurement; Banking; Lending; Synthetic control method; Causal mediation analysis (search for similar items in EconPapers)
JEL-codes: G38 H32 H57 H8 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006536

DOI: 10.1016/j.frl.2024.105623

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