What Do State-Owned Firms Maximize? Evidence from the Italian Banks

Paola Sapienza

No 3168, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies the objective function of state-owned banks. Using information on individual loan contracts, I compare the interest rate charged to two sets of companies with identical characteristics borrowing respectively from state-owned and privately owned banks. State-owned banks charge lower interest rates than do privately owned banks to similar or identical firms, even if the company is able to borrow more from privately owned banks. State-owned banks mostly favour firms located in depressed areas and large firms. The lending behaviour of state-owned banks is affected by the electoral results of the party affiliated with the bank: the stronger the political party in the area where the firm is borrowing, the lower the interest rates charged. This result is robust to including bank and firm fixed effects.

Keywords: Government; Ownership (search for similar items in EconPapers)
JEL-codes: G10 H11 L32 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-cfn and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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