Will Money Talk? Firm Bribery and Credit Access

Abstract

We investigate whether corruption impedes firm growth by limiting access to bank credit. Our estimates demonstrate that access to credit tightens when a firm is more frequently involved in bribery practices and that bribery (most likely) causes this loss of access. We also find that the detrimental impact is mainly driven by supply‐side rather than demand‐side factors and that the loss of access is particularly strong when there are fewer foreign banks in the vicinity of the firm or when competition is either very low or very high in the local banking market. Finally, the bribery‐driven increase in financing obstacle significantly impedes future firm growth.

Factors of national environmental performance in sustainability management aspect

“…First, it depends on the overall economic situation in the world, country and industry, expected trends, and enterprise creditworthiness. The influence of corruption is also emphasized (Qi & Ongena, 2019;Liu et al, 2020). It is important to stress that managing these factors might lead to a significant increase in funding for corporate environmental programs in the medium and even short term.…”

The Impact of Corruption on Smes' Access to Finance: Evidence using Firm-Level Survey Data from Developing Countries

“…2 The corruption measures we use below do not cover judicial corruption directly. Nevertheless, this form of corruption may still affect our results if bribe paying firms are viewed as better connected firms and prone to bribing the judiciary (Qi & Ongena, 2019).…”

“…Given the vastly different experiences of SMEs and large firms with obtaining finance, it is important to analyze SMEs separately from large firms. Third, empirical studies that have examined the corruption-finance nexus indicate that corruption increases SME financial constraints (Qi & Ongena, 2019;Wellalage et al, 2019;Wellalage et al, 2020;Ullah, 2020). However, these studies typically use firms' perception of corruption and access to finance problems rather than objective measures based on actual experience of firms with paying bribes and obtaining finance.…”

The impact of corruption on firms’ access to bank loans: evidence from China

“…Moreover, a high level of corruption leads to opportunistic behaviours in inefficient systems, which increases the non-performing loans generated by bank institutions due to loan defaults. Corruption acts not only increase the uncertainty of banks' avoidance of default but also increase the risk of borrowers' default, which reduces banks' willingness to lend to firms and increases the obstacles of firm financing (Qi & Ongena, 2019;Qian & Strahan, 2007;Wellalage et al, 2019).…”