Gender, Credit, and Firm Outcomes

Abstract

Small and micro enterprises are usually majority-owned by entrepreneurs. Using a unique sample of loan applications from such firms, we study the role of owners' gender in bank credit decisions and post-credit-decision firm outcomes. We find that, ceteris paribus, female entrepreneurs are more prudent loan applicants than are males, since they are less likely to apply for credit or to default after loan origination. The relatively more aggressive behavior of male applicants pays off, however, in terms of higher average firm performance after loan origination.

Business Training With a Better-Informed Lender

“…In this section, we provide additional information on the validity of our identification methods. First, following Delis, Hasan, Iosifidi, and Ongena (2022), we provide evidence that our instrumental variables used in the business training equation do not directly explain the defaulting and approval dummies. Next, using classical bivariate approaches based on 2SLS and Poisson models, we show that we cannot reject the null hypothesis of valid overidentifying restrictions.…”

“…First, we follow Delis, Hasan, Iosifidi, and Ongena (2022) and include the three instruments, at first separately and then concomitantly, in the approval and risk equations, respectively. Delis, Hasan, Iosifidi, and Ongena (2022) argue that the premise for the choice of instrumental variables (IVs) is that they do not directly affect the main outcome variable. By using our IVs directly in Equations ( 1) and ( 4), we show that this is the case (see results in Table VIII of Appendix 8.4).…”