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Bank Discrimination in Transition Economies: Ideology, Information or Incentives?

Loren Brandt () and Hongbin Li ()

No 517, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We study bank discrimination against private firms in transition countries. Theoretically, we show that banks may discriminate for non-profit reasons, but this discrimination diminishes with a bank???s incentives and human capital. Employing matching bank-firm data from China, we empirically examine the extent, sources and consequences of discrimination. Our unique survey design allows us to disentangle sample truncation, omitted variable bias, and endogeneity issues. Our empirical findings confirm the theoretical predictions. We also find that as a result of discrimination, private firms resort to more expensive trade credits.

Keywords: Bank discrimination; privatization; economic transition (search for similar items in EconPapers)
JEL-codes: G14 G21 P26 P34 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2002-10-01
New Economics Papers: this item is included in nep-mfd and nep-tra
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Journal Article: Bank discrimination in transition economies: ideology, information, or incentives? (2003) Downloads
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