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Will Money Talk? Firm Bribery and Credit Access

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  • Shusen Qi
  • Steven Ongena
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.

Suggested Citation

  • Shusen Qi & Steven Ongena, 2019. "Will Money Talk? Firm Bribery and Credit Access," Financial Management, Financial Management Association International, vol. 48(1), pages 117-157, March.
    • Handle: RePEc:bla:finmgt:v:48:y:2019:i:1:p:117-157
    DOI: 10.1111/fima.12218
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    References listed on IDEAS

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    Cited by:

    1. Yu Yan & Shusen Qi, 2021. "I Know What I Need: Optimization of Bribery," Journal of Business Ethics, Springer, vol. 174(2), pages 311-332, November.
    2. Ameet Kumar & Khalid Ahmed & Mujeeb‐u‐Rehman Bhayo & Muhammad Ramzan Kalhoro, 2023. "Banking performance and institutional quality: Evidence from dynamic panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4717-4737, October.
    3. Le, Anh-Tuan & Doan, Anh-Tuan & Phan, Thu, 2021. "Institutional development and firm risk from a dynamic perspective: Does ownership structure matter?," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 342-357.
    4. Nandika Sanath Kumanayake & Ajantha Sisira Kumara & Asankha Pallegedara, 2023. "The nexus between public sector corruption and private sector efficiency: Evidence from worldwide firm‐level data," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 1056-1077, May.
    5. Shusen Qi & Steven Ongena & Hua Cheng, 2022. "Working with women, do men get all the credit?," Small Business Economics, Springer, vol. 59(4), pages 1427-1447, December.
    6. Osei-Tutu, Francis & Weill, Laurent, 2022. "Bank efficiency and access to credit: International evidence," Economic Systems, Elsevier, vol. 46(3).
    7. De Haas, Ralph & Lu, Liping & Ongena, Steven, 2020. "Close Competitors? Bilateral Bank Competition and Spatial Variation in Firms’ Access to Credit," CEPR Discussion Papers 15015, C.E.P.R. Discussion Papers.
    8. Shusen Qi & Steven Ongena, 2020. "Fuel the Engine: Bank Credit and Firm Innovation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 57(2), pages 115-147, April.
    9. Lee, Hanol & Moumbark, Toure, 2022. "Climate change, corruption, and business bribes in South Asia," Finance Research Letters, Elsevier, vol. 47(PB).
    10. Shusen Qi & Kent Ngan‐Cheung Hui & Steven Ongena, 2023. "Inter‐industry FDI spillovers from foreign banks: Evidence in transition economies," Financial Management, Financial Management Association International, vol. 52(1), pages 97-126, March.
    11. Bahoo, Salman, 2020. "Corruption in banks: A bibliometric review and agenda," Finance Research Letters, Elsevier, vol. 35(C).
    12. Benincasa, Emanuela & Betz, Frank & Gattini, Luca, 2024. "How do firms cope with losses from extreme weather events?," Journal of Corporate Finance, Elsevier, vol. 84(C).
    13. Anh‐Tuan Doan & Bich‐Thanh Truong & Chi‐Cuong Nguyen & Phan‐Tam‐Nhu Nguyen & Hai‐Yen Truong & Anh‐Tuan Le, 2023. "Corruption and corporate leverage in an emerging economy: The role of economic freedom," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(2), pages 599-629, June.
    14. Jean-Christophe Statnik & Thi-Le-Giang Vu & Laurent Weill, 2023. "Does Corruption Discourage More Female Entrepreneurs from Applying for Credit?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(1), pages 1-28, March.
    15. Amin,Mohammad & Motta,Vctor, 2021. "The Impact of Corruption on SMEs’ Access to Finance : Evidence Using Firm-Level Survey Data fromDeveloping Countries," Policy Research Working Paper Series 9812, The World Bank.
    16. Ha, Le Thanh & Dung, Hoang Phuong & Thanh, To Trung, 2023. "Bribery, global value chain decisions, and institutional constraints: Evidence from a cross-country firm-level data," International Economics, Elsevier, vol. 173(C), pages 119-142.
    17. Le, Anh-Tuan & Doan, Anh-Tuan, 2020. "Corruption and financial fragility of small and medium enterprises: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 57.

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