Description:

Speaker: Ryu Matsuura

Title: "Access to Finance and Political Connections for Firms"
Abstract: Firms in developing countries often suffer from the lack of access to finance. Some firms consequently substitute for political connections to ease financial constraints. However, there is limited evidence on whether banking sector reforms are effective at mitigating the degree of clientelism between business and politics. Moreover, political connections inhibit market competition, which distorts capital allocation in the economy. It is thus important to understand how an increase in access to finance changes the dependence of firms on political connections. However, there is limited evidence on what kind of economic policies are effective at mitigating the degree of clientelism between business and politics. In this project, I investigate how improved financial access affects the performance of politically connected firms. I will first document the effects of political connections on firm performance and then estimate the causal impacts of an exogenous increase in financial access on political connections effects.