Labor and Finance: The Effect of Bank Relationships
41 Pages Posted: 15 Nov 2018 Last revised: 3 Nov 2021
Date Written: November 1, 2021
We investigate whether firms’ number of bank relationships affects labor market outcomes. Using 5 million observations on matched credit and labor panel data from Brazil, we estimate IV regressions, employing exogenous variation in bank relationships due to nationwide bank M&A activity. Firms with more bank relationships employ more workers and pay higher wage bills. Credit availability, cost of credit and bank heterogeneity are economic channels behind these results. The firm-level results translate into positive macroeconomic effects in municipalities and states. The evidence is novel and indicates positive effects of multiple bank relationships on labor market outcomes in an emerging economy.
Keywords: Credit, banks, real effects, employment, wages, credit registry
JEL Classification: G21, J21, O10
Suggested Citation: Suggested Citation