The Role of Culture in Firm-Bank Matching
58 Pages Posted: 12 Jul 2021 Last revised: 29 Dec 2021
Date Written: July 8, 2021
We assemble a unique dataset containing population-level information on loan applications in a region hosting two cultural groups to study the role of culture in firm borrowing decisions. We find that firms are more likely to apply for loans to culturally-close banks. This effect is stronger for opaque firms, but not for less performing firms, indicating that firms do not expect a preferential treatment from same-culture banks. Loan applications to culturally distant banks increase sharply with firms’ size and age. Our results suggest that culture is an important determinant of firm-bank matching which facilitates the transmission of soft information.
Keywords: Culture; Loan applications; Asymmetric information; Bank-firm matching
JEL Classification: G21, G30, Z1
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