Education and Credit: A Matthew Effect

Manthos D. Delis, Yota Deli, José-Luis Peydró and Adele Whelan

No 202214, Working Papers from School of Economics, University College Dublin

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.

Keywords: Education; Credit; Higher education; Loan application; Bank credit decisions; Firm performance; Pay Inequality (search for similar items in EconPapers)
JEL-codes: G21 G32 I23 I24 I26 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-04
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