The effects of government ownership on bank lending

Paola Sapienza*

*Corresponding author for this work

Research output: Contribution to journalArticle

423 Scopus citations

Abstract

This paper uses information on individual loan contracts to study the effects of government ownership on bank lending behavior. State-owned banks charge lower interest rates than do privately owned banks to similar or identical firms, even if firms are able to borrow more from privately owned banks. State-owned banks mostly favor large firms and firms located in depressed areas. The lending behavior of state-owned banks is affected by the electoral results of the party affiliated with the bank: the stronger the political party in the area where the firm is borrowing, the lower the interest rates charged.

Original languageEnglish (US)
Pages (from-to)357-384
Number of pages28
JournalJournal of Financial Economics
Volume72
Issue number2
DOIs
StatePublished - May 1 2004

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Keywords

  • Banking
  • Government
  • Ownership

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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