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

43 Pages Posted: 27 Mar 2003

See all articles by Loren Brandt

Loren Brandt

University of Toronto - Department of Economics; IZA Institute of Labor Economics

Hongbin Li

Chinese University of Hong Kong - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2002

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

JEL Classification: G14, G21 P26, P34

Suggested Citation

Brandt, Loren and Li, Hongbin, Bank Discrimination in Transition Economies: Ideology, Information or Incentives? (October 2002). Available at SSRN: https://ssrn.com/abstract=360280 or http://dx.doi.org/10.2139/ssrn.360280

Loren Brandt (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4442 (Phone)
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IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Hongbin Li

Chinese University of Hong Kong - Department of Economics ( email )

Shatin, N.T.
Hong Kong

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