Once upon a loan: How folk tales shape access to credit

Jean-Baptiste Marigo and Laurent Weill
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Jean-Baptiste Marigo: IEP Strasbourg - Sciences Po Srasbourg - Institut d'études politiques de Strasbourg - UNISTRA - Université de Strasbourg
Laurent Weill: EM Strasbourg - École de Management de Strasbourg = EM Strasbourg Business School - UNISTRA - Université de Strasbourg, LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg, UK - Univerzita Karlova [Praha, Česká republika] = Charles University [Prague, Czech Republic] = Université Charles [Prague, Republique tchèque]

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Abstract: We investigate the effect of folklore on firms' access to credit. Using firm-level data on a large sample of 38,000 firms covering 124 countries and 274 cultural societies over the 2005–2022 period, we test the hypothesis that oral traditions linking risk-taking to success or failure influence access to credit. We find that folklore affects access to credit. Oral traditions associated with successful challenges increase access to credit, while those associated with unsuccessful challenges decrease access to credit. We further show that folklore influences access to credit through borrower discouragement and loan approval. We also find that foreign-owned firms are less sensitive to the influence of folklore, while more developed legal institutions reinforce its impact. We further observe that folklore explains aggregate credit supply at the country level. Using representations of trust in folklore, we find that more trusting societies are associated with more loan approval but lower loan applications, which results from the fact that higher trust encourages informal credit.

Keywords: Culture; Folklore; Access (search for similar items in EconPapers)
Date: 2025-11
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Published in Journal of Economic Behavior and Organization, 2025, 239, pp.107288. ⟨10.1016/j.jebo.2025.107288⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05621656

DOI: 10.1016/j.jebo.2025.107288

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