Does a Manager's Gender Matter When Accessing Credit? Evidence from European Data

Abstract

Firms can be credit constrained either because a loan has been denied by the lender or because they decide not to apply for such a loan due to expected rejection. Using a large sample of European small and medium enterprises, we investigate the relationship between gender and credit constraints. Although no evidence is found that financial institutions are biased against female managers, female-run firms are less likely to file a loan application, as they anticipate being rejected. As a consequence, firms managed by women obtain less bank financing.JEL Classifications: A13, G21, J16

Is the Lending Decision-Making Process Affected by Behavioral Biases? <br/>—Evidence from Southern Italy

“…The phenomenon is also explained by the fact that, in these countries, female applicants believe their demand for credit will be denied. In the same way Moro et al [22] argue that firms can be financially constrained also because female applicants anticipate the rejection and therefore are less likely to apply for a loan. Buttner and Rosen [23], as well as Stevenson [24], argue that, among other stereotypes, bank officers believe that characteristics of successful entrepreneurs may be more often found in male entrepreneurs.…”

The ex‐ante Effect of Law and Judicial Efficiency on Borrower Discouragement: An International Evidence

“…Group affiliation increases access to external finance by leveraging the reputation and influence of the business group (Alim and Khan, 2016; Khan et al ., 2020). MFEM accounts for potential gender‐related prejudice in the credit market (Moro et al ., 2017).…”

“…Many studies investigate the prevalence of discouraged borrowers by exploring firm and entrepreneur demographic characteristics (e.g., Cavalluzzo and Wolken, 2005; Moro et al ., 2017), market competition (e.g., Han et al ., 2009), and banking structures (e.g., Chakravarty and Xiang, 2013; Mol‐Gómez‐Vázquez et al ., 2019). Little is known about how the legal, judicial, and bankruptcy environments — that can foster financial development — affect demand‐side financing constraints.…”