Contagious Effects of a Political Intervention in Debt Contracts: Evidence Using Loan-Level Data
Year: 2018
Type: article
Abstract: Using an unexpected government regulation that restricted the ability of microfinance institutions to recover loans in one Indian state, I examine whether this intervention affected bank loan performance. The bank loan delinquency rate significantly increased as a result. In response, the ex post bank credit supply declined by more than half. For identification, I compare loans from branches located in regions subject to this intervention with loans from nearby branches of the same bank located in regions not subject to the intervention. I conclude that political interventions in credit markets could have significant spillover effects. Received October 29, 2016; editorial decision November 28, 2017 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhy001
Author: Prasanna L Tantri
Institution: Indian School of Business
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2779650760