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Public procurement and bank lending

Author

Listed:
  • Burger, Anže
  • Marinč, Matej
  • Polanec, Sašo
  • Kotnik, Patricia

Abstract

This article unveils that government is intertwined with banking through a hitherto underexplored channel—through public procurement. On a comprehensive firm-level dataset that combines public procurement and accounting data, we apply the difference-in-differences method to show that treated firms that secure a public procurement contract can strengthen their bank borrowing terms. Treated firms obtain a greater amount of bank funding and a higher share of long-term funding at lower interest rates compared to the control firms. The impact on bank lending exceeds the positive impact due to higher revenues and suggests a positive non-revenue channel of public procurement.

Suggested Citation

  • Burger, Anže & Marinč, Matej & Polanec, Sašo & Kotnik, Patricia, 2024. "Public procurement and bank lending," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006536
    DOI: 10.1016/j.frl.2024.105623
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    More about this item

    Keywords

    Public procurement; Government procurement; Banking; Lending; Synthetic control method; Causal mediation analysis;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H8 - Public Economics - - Miscellaneous Issues

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