Are the loans of state-owned banks politically motivated?

Erik Figueiredo, João Ricardo Faria, Jaime Orrillo and Rodrigo Pereira
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João Ricardo Faria: Florida Atlantic University
Jaime Orrillo: Catholic University of Brasilia
Rodrigo Pereira: Institute of Applied Economic Research (Ipea)

Empirical Economics, 2025, vol. 68, issue 1, No 12, 405-432

Abstract: Abstract This paper investigates the relationship between annual disbursements of Brazil’s largest development bank, BNDES, and mayors political affiliation. We explore a set of Difference-in-Difference (DiD) designs to evaluate causal effects of policy interventions. Using data of Brazilian municipalities, we find that municipalities with mayors belonging to the coalition that supports the Federal government get higher disbursements than the ones with mayors that are out of the coalition. There is strong evidence that firms located in allied municipalities receive average higher loans. Our findings support the view that political bias may distort the credit allocation of state-owned banks.

Keywords: State-owned banks; Political influences; Causal effects; Credit allocation (search for similar items in EconPapers)
JEL-codes: C26 G21 H70 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00181-024-02636-6

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