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Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt

Zuzana Fungáčová (), Anna Kochanova () and Laurent Weill ()

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: This study examines how bribery influences bank debt ratios for a large sample of firms in 14 transition countries. We combine information on bribery practices from the BEEPS survey with firm-level accounting data from the Amadeus database. Bribery is measured by the frequency of extra unofficial payments to officials to “get things done”. We find that bribery is positively related to firms’ total bank debt ratios, which provides evidence that bribing bank officials facilitates firms’ access to bank loans. This impact varies with the maturity of the bank debt, as bribery contributes to higher short-term bank debt ratios but lower long-term bank debt ratios. Finally, we find that the institutional characteristics of the banking industry influence the relation between bribery and firms’ bank debt ratios. Higher levels of financial development constrain the positive effects of bribery, whereas larger market shares of state-owned banks have the opposite effect. The presence of foreign banks also affects the impact of bribery, although this effect depends on the maturity of firms’ bank debt.

Keywords: bank lending; bribery; corruption; Eastern Europe (search for similar items in EconPapers)
JEL-codes: G32 K4 P2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-law and nep-tra
Date: 2014
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Journal Article: Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt (2015) Downloads
Working Paper: Does money buy credit?: Firm-level evidence on bribery and bank debt (2014) Downloads
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