Elections Hinder Firms’ Access to Credit
41 Pages Posted: 10 Feb 2022 Last revised: 11 Feb 2022
Date Written: February 9, 2022
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: Suggested Citation