Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/303422 
Year of Publication: 
2018
Series/Report no.: 
LEQS Paper No. 139
Publisher: 
London School of Economics and Political Science (LSE), European Institute, London
Abstract: 
We document a strong political cycle in bank credit and industry outcomes in Turkey. In line with theories of tactical redistribution, state-owned banks systematically adjust their lending around local elections compared with private banks in the same province based on electoral competition and political alignment of incumbent mayors. This effect only exists in corporate lending as opposed to consumer loans. It creates credit constraints for firms in opposition areas, which suffer drops in employment and sales but not firm entry. There is substantial misallocation of financial resources as provinces and industries with high initial efficiency suffer the greatest constraints.
Subjects: 
Bank credit
Electoral cycle
State-owned banks
Credit misallocation
Document Type: 
Working Paper

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