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Government connections and credit access around the world: Evidence from discouraged borrowers

Qi, S.; Nguyen, D.D.

Government connections and credit access around the world: Evidence from discouraged borrowers Thumbnail


Authors

S. Qi



Abstract

Motivated by the international business literature that examines the interactions between organizations, corruption, and political forces, we examine whether and how government connections affect small and medium-sized enterprises’ (SMEs) credit access around the world. Using a sample of SMEs across 30 developing countries, we show that SMEs with government connections are significantly less likely to be discouraged from approaching banks for a loan as compared to SMEs without such connections. However, connected SMEs do not receive preferential lending from banks. Moreover, the nature of this effect depends on the institutional setting. Specifically, the effect becomes stronger in countries with high levels of corruption, suggesting that government connections are substitutes for poorly functioning formal institutions. Our findings have important implications for policies targeted at reducing corruption, improving access to financing, facilitating entrepreneurship, and attracting foreign investment.

Citation

Qi, S., & Nguyen, D. (2021). Government connections and credit access around the world: Evidence from discouraged borrowers. Journal of International Business Studies, 52(2), 321-333. https://doi.org/10.1057/s41267-020-00341-x

Journal Article Type Article
Acceptance Date May 5, 2020
Online Publication Date Jun 15, 2020
Publication Date 2021-03
Deposit Date Sep 9, 2021
Publicly Available Date Mar 28, 2024
Journal Journal of International Business Studies
Print ISSN 0047-2506
Electronic ISSN 1478-6990
Publisher Palgrave Macmillan
Peer Reviewed Peer Reviewed
Volume 52
Issue 2
Pages 321-333
DOI https://doi.org/10.1057/s41267-020-00341-x
Public URL https://durham-repository.worktribe.com/output/1241068

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Copyright Statement
This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use, but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at:
https://doi.org/10.1057/s41267-020-00341-x




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