Elections Hinder Firms’ Access to Credit

41 Pages Posted: 10 Feb 2022 Last revised: 11 Feb 2022

See all articles by Florian Léon

Florian Léon

Fondation Pour les Etudes et Recherches Sur le Développement International (FERDI)

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: February 9, 2022

Abstract

To analyze whether the occurrence of elections affects access to credit for firms, we perform an investigation using firm-level data covering 44 developed and developing countries. The results show that elections impair access to credit. Specifically, firms are more credit-constrained in election years and pre-election years as elections exacerbate political uncertainty. While lower credit demand is a tangible negative effect of elections, their occurrece per se does not seem to affect credit supply. We further establish that the design of political and financial systems affects how elections influence access to credit.

Keywords: elections, access to credit, credit constraints

JEL Classification: G21, D72, O16

Suggested Citation

Léon, Florian and Weill, Laurent, Elections Hinder Firms’ Access to Credit (February 9, 2022). BOFIT Discussion Paper No. 3/2022, Available at SSRN: https://ssrn.com/abstract=4031243

Florian Léon (Contact Author)

Fondation Pour les Etudes et Recherches Sur le Développement International (FERDI) ( email )

63 boulevard François Mitterrand
Clermont-Ferrand, 63000
France

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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